What does "practice" mean in this context?

Question

Consider this quote:

DROP OF A HAT - Acting readily or on some single signal. In the 19th century it was occasionally the practice in the United States to signal the start of a fight or a race by dropping a hat or sweeping it downward while holding it in the hand. The quick response to the signal found its way into the language for any action that begins quickly without much need for prompting.

Looking up OALD, there are three definitions that seems relevant to the context, but I'm not sure which one is the most appropriate, they are:

1 [uncountable] action rather than ideas
the theory and practice of teaching
She's determined to put her new ideas into practice.

2 [uncountable, countable] a way of doing something that is the usual or expected way in a particular organization or situation
common/current/standard practice
guidelines for good practice
a review of pay and working practices
religious practices
child care policy and practice

3 [countable] a thing that is done regularly; a habit or a custom
the German practice of giving workers a say in how their company is run
It is his practice to read several books a week.

Answer 1

Number two most closely matches your example, although two and three are very similar.

Here's the difference between two and three in case that's what's causing your confusion: Number two indicates a custom that is sometimes practiced, yet not regularly, whereas number three indicates that it is the expected norm.

The word occasionally is the contextual cue that indicates it's number two; but again, the difference is subtle.

Answer 2

2, as it refers to the spontaneity of the action rather than the predictability of it or requirement for it.

In the context of, say, a Formula 1 race, it could be a flag, or a dropping of the starter's hand, or the dropping of a hat. The usual practice is to start the race with some signal from the starter, which may be the dropping of a hat.