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Tools are Items used for Crafting and obtaining Resources. Most Tools are Crafted with Handles and Tool Heads, though few are individual Items themselves.
Some examples of Tool categories are: Woodcutting tools, Mining tools, and Weapons.
Tools have 3 states of durability. Over time the tool will start to look visibly worn, and eventually break.
For a list of variations on tools, see Moulds
Tools can be made out of the basic materials found in the Overworld. However, they are not very effective. See Primitive Tools for more info.
Trees, branches and sticks can all be cut with an axe blade, though the tool equivalents usually work better than the more weapon-oriented ones. Flint can also be used if needed.
A basic one handed hatchet.
Ore can be mined with a variety of tools. Usually a pickaxe is used, however Flint can also be used to mine low level Ore.
A basic one handed pickaxe.
Blacksmithing is usually performed with a hammer.
A basic one handed hammer.
Woodworking is usually done with a hammer and a chisel.
You can use a shovel to go Digging for Ore, Ingot or Coin.
A rusty shovel.