I have a 1997 S320 and i've been struggling with brake squeel.

I bought OEM pads and it still squeels regularly at low speeds sometimes extremely loud.

Today i took the caliper off to investigate and i see a cut in the outside pad going about 3/4 of the way up and down it. This isn't stock is it? Would this cause a squeel? What caused the pad to get a groove in it? I dont want to pay for OEM again, what should i buy? Will thin rotors cause a squeel or break pad problems?