MK12,
Here goes.
Lets say you buy a 25 tool cnc mill with controller. Before you can use the cnc mill, you must load the tool rack with the cutters you want to use. In order to do that, you must put secure the cutter to the tool holder, define the tool in the system, and then load the tool into the index.
You then can program the cnc mill to do whatever you want on the display screen and specify the tool.
As far as cad cam software goes, I THINK (note I said think) you must also define the tool in the software before sending the program to the cnc mill.
hope this helps,
james