SL Colonies uses tools through SL Experiences. Items which are crafted can come in the form of tools which can be traded like normal items, but can also be sent to your HUD’s contents as a prim item which when in use, will automatically attach to your avatar. When done with a tool, you can right click it and detach. Tools will also detach automatically if you leave the region.
Various gatherable objects (such as mines) and crafting stations (such as a smithing anvil) require that you have a tool attached to perform the task. Each use of the tool will take away from its durability. When durability reaches 0, your tool will break and you will need to load up another.
All tools are animated and some even come with sounds while in use to immerse yourself into the environment more. You can only send a tool from your inventory into your HUD in an official SL Colonies sim which is registered using an [SLC] Region Server.
To see how tools work, you can watch this 101 video: