Touchstone has an unusual function and there is some continuing confusion about his character roles as both a (1) Shakespearean Fool and a (2) "touchstone." Along with these roles, he is the (3) companion to Rosalind/Ganymede and Celia/Aliena as they go to and dwell in Arden Forest.
Act I shows that, while Touchstone is the Duke's motley dressed Fool, he, Celia and Rosalind share an established bond of playful wit and friendship. He would not have accepted the role of traveling protector and companion if this bond had not been great, especially since, as we later learn, he dislikes rustic living.
The more pity, that fools may not speak wisely what
wise men do foolishly.
By my troth, thou sayest true; for since the little
wit that fools have was silenced, the little foolery
that wise men have makes a great show.
A "touchstone" is a siliceous, semi-precious gemstone, often jasper, of minimal value of its own that identifies gold or silver content in metal alloys. When a gold or silver alloy (gold/silver plus other metals) is rubbed against jasper, the color of the mark that appears reveals the quantity of precious metal in the alloy: a low, a standard, or a higher than standard quantity.
Touchstone has this role in Arden because his foolish conversations with others, for example Corbin and Audrey, bring out their inner traits and reveal the depth of human "precious metal" in them. The confusion that arises from his role as a jasper touchstone is that it is sometimes said that by it he shows his own great worth as well. Yet Touchstone makes it clear to us he is a "semi-precious" jasper: he prefers pomp to sincerity; he has dishonorable designs for his marriage to Audrey; he is shallow and materialistic.
Returning to his role with Rosalind and Celia for a moment, Touchstone is also their "jasper" stone. It is said of jasper that it protects and provides security and stability while easing emotional stress. Touchstone is a "jasper" for Rosalind and Celia.
Jasper is a strong securing gemstone. It is a stability gemstone. It is a powerful protection ... and it eases emotional stresses,... (Crystal-Cure.com)
The Shakespearean Fool and Clown are different. A Fool is a sophisticate urban character who twists words and ideas by intention, (think of Falstaff and the Fool in Henry the IV and King Lear). A Clown is a country "natural" who unknowingly twists words and ideas (think Dogberry in Much Ado). Though often confused with Clown, Touchstone is a Fool, not a Clown. He is sophisticated and knowingly, purposefully, intentionally twists words and ideas to make a point or to reveal something about another character. Fools usually reveal principal characters' traits, but, here, he even reveals traits of minor characters like Audrey.
I do, truly; for thou swearest to me thou art
honest: now, if thou wert a poet, I might have some
hope thou didst feign.
Would you not have me honest?