After K.K. Slider's first concert on your island, you get the Island Designer app, which lets you do terraforming to edit cliffs, water, and paths.
Unlock the Island Designer App
To unlock the Island Designer app, you need to Upgrade to the Resident Services Building, and you have to have 10 residents living on your island. Ask Isabelle about island evals, and follow her advice until you have a three-star rating. After K.K. Slider's concert the next day, you get the Island Designer app, which will let you do terraforming on your island.
How to Use the Island Designer App
Use the Island Designer app in your NookPhone to activate construction mode. Then you can press the + button to choose a tool. Press A while that tool is active to use it.
At first, the Island Designer app only has path tools. Select a path tool and press A to put it on the ground in front of you. You can add to the path by using the same tool next to an existing path. You can also make corners round by using the path tool on a corner.
You can unlock more paths by redeeming Nook Miles at the Nook Stop Terminal in Resident Services.
Paths do not prevent buried objects from appearing or prevent trees from growing. Objects that fall onto paths will not bounce away or disappear.
Cliffs and Rivers
You can unlock the cliff tool and the river tool by redeeming Nook Miles at the Nook Stop Terminal in Resident Services.
If you use the cliff shovel where there is not a cliff, you will create a cliff. Use the cliff shovel on an existing cliff to remove it, or create an angled cliff in a corner.
If you use the river shovel where there is not water, you will create a square of water. You can use the river shovel on water to get rid of the water, turning it into flat ground. You can also create angles by using the river shovel where the edge of the water is a corner.