noun
knothole; peephole
Literal hole in wood where a knot has fallen out, or a small hole for looking through.
古い床板の節穴から光が漏れていた。
Light was leaking through a knothole in the old floorboard.
彼はドアの節穴から部屋の中をのぞいた。
He peeked into the room through a peephole in the door.
noun
poor eyesight; tunnel vision
Figurative use, often in set phrases like 節穴か or 節穴もいいところ, implying someone fails to notice obvious things.
こんなに近くにあるのに気づかないなんて、お前の目は節穴か。
It's right here and you didn't notice? Are your eyes just for show?
あの審判は節穴だ。明らかなファウルを見逃した。
That referee is blind. He missed an obvious foul.
のぞき穴 is a general peephole, while 節穴 specifically refers to a knothole or is used figuratively for poor vision.
Compound of 節 (ふし, 'knot in wood') and 穴 (あな, 'hole'). The figurative sense comes from the idea that a knothole is a useless hole, implying eyes that do not function properly.