Hoe

Hoes are tools used to till dirt and grass blocks into farmland blocks, the first step in farming. To till, right-click on a grass or dirt block while holding a hoe. When tilling grass, the grass may drop Seeds. The chance of finding seeds was increased in the Beta 1.2 update.

Crafting
Hoes are crafted using 2 sticks and 2 units of a tool material:

Trivia

 * Tilling a dirt block which has a dirt block on top of it will change it to farmland even though it cannot be used. If a hoe is used on a block horizontally adjacent to such a block, the first block will revert to dirt and the selected block will not be tilled. The hoe will still take one point of damage from each use.
 * Prior to Beta 1.2, there was a glitch that Placing a dirt block under any block, tilling the dirt, and planting a seed on it would cause the block above to disappear without yielding any blocks.
 * The hoe does not give any faster mining of dirt blocks or grass blocks.
 * When you till a dirt block, the top layer is removed. But due to the way farmland is textured, it appears as if the block sinks into the ground. The texture for the sides is shifted down instead of the top pixels being removed.