The shovel is an item you get at the Fisher house, and is used to dig up hidden treasures. There are 10 digging spots in the game, giving various kinds of treasures. Pressing F is the shortcut, otherwise use it through your inventory.
The 10 digging sites are:
8 Pix - Where you find the shovel.
1 Limit Boost - Next to the chair just outside the Fisher house.
2 Potions - In front of the Goldbrim bridge.
2 Ether - At the explosion site in Everthorn forest.
10 Pix - In Blackwhisper Cave in the second part of the cave, near the most southern path.
25 Pix - In the crater in Blackwhisper cave.
The "Gnome trouble" sidequest - near the mushrooms south of the gnome in Gwydion forest.
20 Pix - In front of Gibdo.
2 potions - Right next to your Savina house.
20 Pix - At the Nightshade Cemetary near the tree. Can be found during the "X marks the spot" sidequest.
Digging up 3 items will unlock the medal Diglet.