All items with the exceptions of class insignia can be enhanced. Enhancements can just involve the craftsmanship of a smith, or be based on mystical powers of strange altars and special NPCs.

Item enhancements are meant to allow an additional increase in party power when immediate quests, some rudimentary grinding and looting have made you reach a certain constant level.  This is reflected in the costs, which makes it more desirable to buy equipment while you still don't have a good set to start with.  The better enhancements also cost talent points, or even some of your max health or mana.  So don't just enhance everything, wait till you know what your favourite equipment is.

The maximum number of enhancements depends on the crafter and the desired enhancement. So if you want a poison enhancement added that can only be put on an item with zero pre-existing enhancements, then add that first before adding any other enhancement. The order matters!

Only equipped items can be enhanced, and the owner needs to be alive. Some enhancements increase the strength/dexterity requirement of the item as well, so be mindful of the warning if the item would become unequipped in the process.

The number of enhancements already embedded in an item can be seen as the number of "+" at the end of its name if you click on it in normal inventory mode.

WARNING: Enhancements are permanent and cannot be reversed or removed.

It is also planned to have a RENAME crafting option at some stage.  It will probably not count as an enhancement.

Enhancements vary by the craftsman you visit.  So you should check out these:

Chapter 1 (island):
- the shopkeeper in the shelter
- the smithy in the village
- the bow maker in the village
- the FLAME

Chapter 2:
- the smithy in the castle cave
- the priest there
- Jaimar once rescued
- some location specific places in catacombs and icy valley
- three people in the elf city
- the smith in the berserker camp

Chapter 3:
- Tartessos: berserker axe smith, sword smith
- Bracya village: FLAME, bowmaker, smith
- castle port city: priest, Jaimar
- druid cove: fire altar, ice altar, lightning altar, blood altar
- dwarven city smith
- warlock sandy islands: mystical tree
- outlaw camp: shady alchemist
- several in the elf city