It is used for clearing/cutting crops, grass, and weeds. You can upgrade your tools by giving the appropriate ore and fee to Saibara at the blacksmith's shop.
You can measure your upgrade level in the tools menu. Every 100% is an upgrade and will denote the level you can upgrade to with a miniature ore icon of the appropriate level.
When the player receives the sickle, it will start at a tool level of one. The sickle can be upgraded up to a level of seven, and becomes more and more useful with every upgrade. Below is a list of upgrades that can be made to the sickle throughout the game. Upgrades are made at the Blacksmith's by Saibara.