The Collaborative International Dictionary of English v.0.48:

Touchwood \Touch"wood`\, n. [Probably for tachwood; OE. tache
   tinder (of uncertain origin) + wood.]
   [1913 Webster]
   1. Wood so decayed as to serve for tinder; spunk, or punk.
      [1913 Webster]

   2. Dried fungi used as tinder; especially, the Polyporus
      igniarius.
      [1913 Webster]

WordNet (r) 3.0 (2006):

touchwood
    n 1: material for starting a fire [syn: kindling, tinder,
         touchwood, spunk, punk]