Movie cameras need the holes so they can align consecutive frames exactly. Occasionaly still cameras are modified to do pin registration so that frames can be reliably positioned (for example for special effects shots where stills from multiple cameras are combined, as in "Bullet time" effects).
828 Bantam film is 35mm stock without the perforations, in a minutre roll film format. Kodak pushed it for years - bigger negative, same size camera. It should have been a no-brainer, but it never caught on.
re- what happens to the holes... I often wonder where schools get those bits of string that you use to tie together exam scripts! Is there a factory somewhere full of people cutting string into 3" lengths?
Ian