The groove supplies oil to the lifter galleys, Its needed on early blocks that do not have a grooved camshaft journal.
From the
Bill Mitchell web site ..
Also on a stock 454, this shows the two holes in the rear camshaft journal that feed both the lifter galleys. Therefore, oil must pass by both the rear main bearing and the rear cam bearing before finding its way to the lifters. Also, this groove is not present in an early 396 block, which is why a grooved cam is needed in that application to ensure oil feed to the lifters.