You can find Forges, Crafting Benches, and Potion Cauldrons in many places. Just click on one of these to be presented with the crafting options. Forges can be used to craft metal items, benches can be used to craft cloth, leather and wooden items, and you use pots to brew potions. You use the skills Craft Weapon and Craft Armor to make weapons and armor, and you use the Lore skill for potion making.
To craft you will need raw materials which you can pick up in various ways: some monsters drop useful ingredients for potions; Iron, Steel, Silver, Adamantium, and Mithral can be mined; and some trees can be bashed to knock them down and create wooden planks. All of these things can be found in various areas of the world, so look around carefully or ask other players where the best places are. Crafting each item also requires a small amount of gold, so you will need to have some money as well.
Mundane ingredients enable you to craft Masterwork (+1) items, and rare ingredients such as Mithral allow the creation of items with special properties.
In order to use the Craft Scroll and Craft Wand skills you will also need raw materials. Note that some scrolls are not available to buy or are very rare in the Hidden Tradition world – particularly Resurrection scrolls, which are extremely rare. So having someone able to craft these items can be very handy for a party.
Characters with high Intelligence and Lore skills are best for crafting, so if you want to craft things the best classes to pick are Bard, Rogue, or Wizard.