Has anyone ever experienced this phenomenon?
A part appears to be free of defects prior to peening, then after peening a scratch or nick becomes visible?

There appears to be two alternatives as to scratch origin. Either the scratch was present before peening or it was imposed after peening. If it was present before peening then the scratch cannot be sharp and must have appear to have been 'blurred' by the action of peening. If the scratch appears to be sharp, then it must have occurred after peening - as a result of part handling. A blurred scratch is rare but can be the result of a scratch having been smoothed over by a burnishing type of process applied prior to peening. During burnishing metal flows over the scratch hiding it from view. Subsequent peening then stretches the surface revealing a (blurred) scratch.

Could it be that something has gotten into the working mix of shot that is being cycled through and shot at the part causing damage when it hits? Maybe bit of metal or something? This would be applicable on a system without classifier screens to take out stuff like that, of course.

The damage looks like a long scatch or goove thats been peened over. Problem is we are 100% sure it was not visible to the naked eye prior to peening. Socrates answer seems to have hit the nail on the head.

Thanks for the info.

Dear Sir,
With this scratch, How did you remove it? And after removed it, did you re-peen again?