What would i use to carve lettering into wood?
You can use wood carving knives designed for the purpose, also there are a rang of wood chisels that designed for carving wood also. The other is you can use a hot iron similar to a soldering iron for wood burning engraving. If these items are not available to you as some of them are expensive just like the writer before me suggested th old pocket knife will do as we have all done some type graffiti at one time or another in our life time. The only problem with carving initials into trees is that you can cause some minor damage to the bark of the tree and it may be illegal to do so in a public park.
