That would take some precise grinding...! It looks perfect all the way around without any interruptions..!
I think Frank nailed this one. Hard to really say since its pure speculation on how a coin gets damaged in most cases. Neat looking though.
Not difficult. Use wax or an adhesive to attach it to a spindle of a lathe, set your tool rest at an angle to the face of the coin and then grind or shave the bevel on the edge of the coin. Take about a minute once you start the shaving.
It looks like it was recessed inside something. Medallion maybe? Or like Treashunt said, a "lucky penny" trinket.