The Horadric Cube you gained during Act II has the ability to transmute items to create other items (for instance, using health and mana potions to create a rejuvenation potion). Diablo II: Lord of Destruction adds an exciting new ability to the Horadric Cube--the ability to create crafted items. You will create crafted items by using the Horadric Cube to transmute a perfect gem, weapon or armor type, jewel, or runeinto a new item. Crafted items have specific combinations and can create some exciting items.
For more on Diablo II: Lord of Destruction Crafted Items, visit GameSpot's Diablo II: Lord of Destruction hint and FAQ section at: http://gamespot.com/gamespot/filters/products/0,11114,370600,00.html