I asked my son about the cutout at the bottom of the blade, near the handle, and he told me it was so flowing blood can drain off the knife before it gets to the handle. The cutout on my knife is more of a double rectangle design, like this one:
![](http://img2.tradeee.com/photo/11825181/Gurkha_Khukuri_Knife.jpg)
I have the original (wooden!) sheath for mine, too.