The hoe is used to turn dirt and grass blocks into farmland for producing (growing) wheat, melons or pumpkins. A myth is that golden hoes instantly create fertile (watered) farmland, but this is not true. When dirt is tilled by a water source block, any tilled dirt at least 4 blocks away will become fertile (again, watered) this factor can be used to make very efficient gardens. To do so put a source block in the ground and till the dirt 4 blocks on each side and make a "cube" of tilled dirt then till all the remaining dirt. Doing this will make all the dirt fertile, making crops grow much faster, and produce more crops. Unlike other tools, hoes do not increase damage dealt in combat, nor do they lose durability when used to hit a mob.
Prior to Beta 1.2, there was a glitch that placing a dirtblock under any block, tilling the dirt, and planting a seed on it would cause the block above to disappear without yielding any blocks.
Prior to Minecraft Version 1.6, this tool was also used to collect seeds from grass blocks. This feature of the hoe is now redundant because of the addition of tall grass.
The hoe is regarded as one of the most useless tools (with exception of when a player is farming) as it has the capability to be formed from any material (Iron, Gold, Diamond, etc.) but these offer no real advantages over the simple wooden version. Therefore, hoes made from dificult-to-find materials are usually utilized as a "good luck charms" or decoration when not in use. This also made the saying "don't waste your diamonds on a hoe". The different versions only give durability differences.
The hoe is one of the only tools that can't be enchanted. The other being Flint and Steel.
Due to the fact that once a garden is made a hoe isn't used that much, one hoe of any type can last the player quite a long time.