Composite/metal stacks are widely used in aerospace structures. To study the mechanism of damage generation during drilling of carbon/epoxy composites and titanium alloy stacks, both traditional drilling and orbital drilling were used. Because the cutting parameters of the two drilling processes were different from each other, an appropriate comparing method was proposed based on the analysis of kinematics of orbital drilling and traditional drilling. The results show that high cutting temperature is the main reason for the damage generation during drilling of composite/titanium stacks. Cutting heat generated during machining of titanium alloy conducts to the composites and leads to the increase of composite temperature. High cutting temperature induces the degradation of carbon/epoxy composite properties, which results in the generation of damage during machining of composites. The cutting force in axial direction during orbital drilling is generally as high as that during traditional drilling. However, the temperature during orbital drilling is 36.3% less than that during traditional drilling. High cutting temperature and continuous chip generated during traditional drilling cause the high hole-wall roughness of titanium alloy. The lower temperature during orbital drilling is responsible for the machining quality of orbital drilling being higher than that of traditional drilling.