I am getting this error pertaining to .src and .inc files. Any suggestions what I should be looking for?

You defined variable inside program or function which is not used.

so do I just delete that out?

If useScissors.src is saying "Warning: local variable 'tool' not used. I could just delete out 'tool' and pray that it is ok?

Try and compile, if script compiles then all is legit.

sounds like your code is something like program scissors( who, tool ) and in that case if you remove that tool it wont work because an item use script need 2 parameters

If thats the case just add somewhere in your code tool := tool; and the warning is gone, or let it be if you dont care because it does not stop anything from working, its just reporting that you have a variable hanging there never used