Almost correct, in this case this is not caused by imperfect welding, the hole at the top there is a drain hole. But this drain hole is at the top, which is incorrect, a drain hole at the top allows the vertical pipe to fill with water (condensation form or otherwise) and ice, which then produces this extrusion effect. Drain holes should always be at the lowest point, if at all. If there were no drain holes, there is a chance that the internal condensation of the internal humidity (Steel shop environment is fairly warm) and the eventual freezing of that liquid water would cause the weld seams to burst. Usually this isn't that much of a problem for small volumes, and it causes rust bleeding over your nice rail or fence, but larger outdoor sections can have some trouble.

Source - I work in a draft office for a structural steel company and do occasional site surveys, I have seem some questionable metal...

Edit: Sorry, the hole is for the galvanizing that this rail has, without that hole, when the Galvanizing company drops that in the tank of molten zinc and random crap, the welds would burst open due to the expansion of the air trapped inside.