Okay, so what is a fairy stone besides a really cool rock with a hole in it?
The name says it all. The larger stones are portals to the realm of the Fae. Any size brings you good luck and wards you from evil, since they're shaped like an eye. Some believe if you look through the hole, you can actually see fairies. The holes in the rocks form naturally over time from running water passing over the stone. And the fairy stone is a totally cool story writing prompt!
Here are some links for further reading and pics: