How do I make tree branches? I'm not sure what tool/technique to use to make the grooves in the fondant to make them look like branches.

there are these:
http://shop.hobbylobby.com/store/item.aspx?ItemId=168813&F_All=Y
I've never used them, but happen to come across them the other day! They might help.

To make groves you can use many things. If you have a veining tool for gumpaste flowers. The back of a knife blade, an exacto knife...