You are right, it's not really square, but the rounded edges can be chiseled away fairly easy, especially if the drill bit has the chisel built right into it as jacquesm's earlier image showed (http://www.machinemart.co.uk/images/library/range/large/0104...). although if it's hard wood, you may need to use a solid chisel and a hammer to pound the heck out if it.
That's what I thought, too, but then I realized that what we were both missing is that the edges of the cutting surface are not the same as the edges of the shape.
The vertices really do trace out a right angled square, so if you just put cutting surfaces at the vertices and inside them, it really will cut a square.
I'd like to see pictures of the holes created with this bit.