Tool

Tools are items used by the player while held to perform actions faster, to gather materials not obtainable by hand, or to perform completely new actions.

Shovel
Shovels are used for removing dirt, sand, gravel, clay and snow faster.

Pickaxe
Pickaxes are used for removing stone, cobblestone, mossy cobblestone, coal, iron ore, gold ore, diamond, obsidian, and stairs faster.

Stone and coal can only be retrieved with a wooden pickaxe or better; iron ore with a stone pickaxe or better; redstone ore, gold ore and diamond with an iron pickaxe or better; and obsidian with a diamond pickaxe.

Axe
Axes are used for removing logs, planks, and chests faster.

Bucket
Buckets are used to hold water, lava, or milk for transport. They can only pick up Water springs and lava springs and not the "run off" from  these blocks. Springs are easily identified by the texture as the top of a spring block will never be moving whereas non-spring blocks will  almost always be flowing.

Flint and Steel
Flint and Steel is used to light trees, grass, and mobs on fire.

Hoe
Hoes can be used to till Dirt blocks. Tilling Grass can cause Seeds to drop, which can then be grown on tilled ground that is near water.

Tool Material and Efficiency
The primary tools can be made out of four different materials: wood, stone, iron, and diamond. A fifth material, gold, is equal to wood. Each material has a limited amount of uses (durability) and a specific action time. The better the material used, the more uses it has and the shorter the action time. The following chart, courtesy of Crixnmix (http://www.minecraftforum.net/viewtopic.php?f=35&t=15985), portrays the average time, in seconds, required to break a block depending on what material is used to craft a tool.

(*) These values represent tools which yield no block drops.

(**) There is double durability damage to weapons when they are used to break glass and leaves.