Sue,
Rotating Assembly= Crankshaft, connecting rods, pistons, piston pins, and possibly the camshaft.
Basically all the rotating internal parts of the engine that produce power output.

Also, balancing an engine involves removing metal on internal parts to compensate for heavier sides of that part.
It's similar to balancing tires. The shop will add weights to compensate.

In the case of the piston holes, I think the concern is that you have just removed metal, though minute amounts, but it could easily be enough to cause a disturbance in the Force...