Touchstone is the Fool or Natural of Duke Frederick's court. When he makes his first entrance in Act I, Scene II of As You Like It, Celia and Rosalind interrupt, or cut off, their witty repartee about Fortune (blind Roman goddess of luck) and say that "Fortune sent in the fool to cut off the argument" and "Fortune makes Nature's natural the cutter-off." By this they mean that they are interrupted ("cut off") by the entrance of Touchstone ("cutter-off"), and thus identify Touchstone as the court jester. Touchstone confirms this role by entering into seemingly meaningless jesting and word play.
Court jesters were called "naturals" and "fools" because they were thought to be unsophisticated and perhaps not fully mentally developed. They were favored at court because they were skilled at word play, especially puns and could entertain with ridiculous sounding speeches and riddles. They were valued because hidden in the tongue twisting comments were truths about the courtier's and ruler's beliefs and actions. If anyone other than a fool spoke out against a ruler, he would be punished, but if it's just a "natural" speaking, well, he doesn't know what he's saying and all can be amused by the remarks: "The more pity, that fools may not speak wisely what wise men do foolishly."
Touchstone comes to Celia and Rosalind to say that Celia's father Duke Frederick wants to see them. They get involved in word play about swearing false oaths and true oaths (e.g., if a woman swears by her beard, she hasn't sworn a false oath because she hasn't got a beard; so she has sworn no oath).
He then stays to comment on the wrestling match Le Beau comes to tell Celia and Rosalind about; his comments put the wrestling match in perspective (" it is the first time that ever I heard breaking of ribs was sport for ladies"). This allows Celia a remark that reveals an important character trait that stands in contrast to one of Rosalind's character traits: Celia has more delicate sensibilities than Rosalind, and Rosalind is more daring and adventuresome than Celia. Duke Frederick later finds the girls himself. They never go to him but stay and watch the wrestling match, wherewith Orlando is introduced.