Use a notched trowel to spread thinset (tile adhesive) when setting tiles. The notches in the trowel will create grooves in the thinset. The grooves ensure that each tile will be set in an even amount of thinset.
After setting your first tile, pop it back up and check for coverage. Almost all of the back of the tile should be covered in thinset. If there are bare spots on the back of the tile, you need to use a larger notched trowel.
Do not confuse margin and notched trowels with some of the more common tools that also have "trowel" in their name. For example, garden trowels are basically miniature shovels that can serve a number of purposes in your landscaping work. When transplanting small plants (such as most annual plants), I often use this tool. Since it can be wielded with one hand, it frees up my other hand to hold the plant during the installation. Another popular use for this garden implement is removing the occasional weed (but for bigger weeding jobs, use a garden hoe).
Another different and more widely known tool that goes by this name is the brick trowel.