The hole in normal use is left open so any fluids from either the engine, gearbox or from elsewhere in the bell housing can escape - drain out. The screw in plug is normally stored in a threaded receptacle in the bell housing a couple of inches to the left of the hole.
When fording a creek or in other scenarios where water could get into the bell housing you move the plug from its receptacle and screw it into the hole sealing the bell housing. When no longer needed it should be removed and screwed back into the storage position.
Here is a pic of mine - you can see the threaded drain hole and the plug in its storage position.
sump.jpg
So leave it here most of the time until needed.
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