Multi-ore Detector emits a pulse that reveals all ores nearby, even if they are hidden from sight (behind the blocks, in a non-illuminated area, etc.). Blocks that contain the ore are colored/illuminated (different colors for different ores), but this only lasts for a very short time.
If you upgrade this tool, the range of pulses will increase. It will also start detecting higher-tier ores (it can't detect most ores at tier 1, and some ores at tier 2). At tier 3 it can detect all ores.
If you are searching for one specific ore (e.g. Titanium Ore or Diamonds), it may be more convenient to use Precision Ore Detector instead (it won't notify you about ores that you are currently not interested in).
Another alternative is to use robots (Ore Drone I, Ore Drone II, Ore Drone III or Mining Drone), which will fly after you (similarly to pets) and will periodically fire the detection pulse. Mining Drone will detect caves (similarly to Cave Detector) in addition to ores. Side-effect of using robots is that you won't be able to use a combat-capable pet (because you can only have 1 active pet, and the robot counts as a pet).
Gadgetry (Engineering tree).