The simplest way to cut a hole in tile is to use a diamond coring bit. These bits are expensive and should be well taken care of. With that said lets look at a simple method of drilling a hole in tile.
The video below shows me using a scrap tile as a guide to hold the diamond coring bit from wandering while I drill the finished hole in the tile to be attached to the wall.
Not all holes are drilled prior to installing the tile. It can be harder to drill when the hole is on the finished grouted surface. I have a few more pictures on file and will try and grab them to place more info here.
In the photo above you can see a half circle forming in the fray floor tile. It is important that when you do not have a jig or scrap tile to be very careful when you start the hole. Notice as well the water. This keeps the bit cool.
Diamond coring bits look like this.
They come in many sizes and if you use them with care they will last for a long time. Use them wrong and you might only get one hole out of them.
A perfect hole in tile looks like this.
In the discussion section of this resource on drilling holes in tile I showcase the various drill bits you can use. Click the little discussion tab next to the overview tab above to see these other posts.