A tool is a resource that allows you to perform certain actions that you could not do, if you did not have it in your posession. A tool is generally not used up in the process, though many can break.
A list of tools in the game, and what they enable you to do:
A Dowsing Rod allows you to prospect for ore.
A Basic Fishing Pole allows you to fish when you are near water.
Varieties of knives, along with the carving skill, allow you to whittle tinder, carve a sharpened stick, personal chits, wooden pegs, and other things.
A scythe and a papyrus basket, when used with the Rhythmic Strength skill allow you to pick grass faster.
A shovel allows you to dig up dirt, as well as dig for cuttable stones and medium stones. Basic shovels can be created on a carpentry bench.
More efficient ones are created on an anvil with Blacksmithing.
To harvest Limestone, you must have both a hammer and a chisel.
Currently known varieties are: