You are stranded on an island, and here you can do quests for the inhabitants, level up your character, build whatever you want, play with cool weapons and much more. Your goal is however to find a way off the island and find out how you got there. As mentioned, you can build, craft, and you can also manipulate the island's terrain.
You can dig up and down with the shovel. And you can build stuff with the log which you get from cutting down trees.