Tools are a loose association of items that are used to perform the various non-combat tasks involved in Terraria gameplay, such as construction and exploration, among many others. Tools are generally wielded via the ⚒ Use / Attack key while they are held as the active hotbar item; though they are differentiated from weapons, whose primary use is instead to damage enemies. Tools are also differentiated from accessories, which provide passive abilities, while tools are used proactively.
Pickaxes, axes, and hammers are tools that are essential at all stages of gameplay for their ability to precisely dismantle world tiles, like placed Blocks, background Walls, plants, or placed furniture, and convert them all to collectible inventory items for re-placement in other locations, or for other uses, such as crafting. They also double as basic melee weapons, although they generally inflict far less damage than actual weapons of corresponding tiers.
Pickaxes and Drills are used to free placed blocks or furniture for collection. When used on blocks, this is often referred to as "mining" or "digging". Their tier determines which types of blocks they can mine, as well as the number of hits it takes to remove each block type (see Pickaxe and Drill for those details). Drills function identically to Pickaxes, but with a different animation and sound effect.
Axes and Chainsaws are used to harvest large plants like Trees, Cacti, and giant glowing mushrooms (Wood blocks are removed with a pickaxe instead). Chainsaws function identically to Axes, but with an alternate animation and sound effect. Hamaxes function as both Axes and Hammers.
Hammers are used to free background walls for collection, to destroy background walls which cannot be collected, to shape foreground blocks to create slopes and half-tiles, and to shape platforms to create stairs. They are also used to destroy Shadow Orbs and Crimson Hearts. The Pwnhammer, Hammush, and The Axe can additionally be used in Hardmode to destroy Altars, which triggers the spawning of new Hardmode Ores.