Dowel size versus hole size
The holes are typically the same size as the dowel. Dowels are usually compressed wood, compressed in such a way that it leave lengthwise grooves in the sides all around. These grooves serve as a relief for the glue when the dowels are inserted, both dowel and hole should be coated. When the glue soaks in the dowel, the dowel will swell the dowel the little bit it was compressed, so it fits even tighter.