Unlike most games, there are no crafting professions, and no leveling. If you have the right materials you take them to the NPC and make the item.
Gifts and Lustres. With the blacksmiths help you can turn stuff you don't need or cannot use into things you might.
The Craft Items dialogue box will display all items that can be made. Selecting one will show the required materials along the bottom. If you meet all the requirements you simply click the Create button to make the item.
Generally, you must start with a generic item you found in a Dungeon, such as Skeleton Gauntlet. Go to Off-hand Weapon to see all the differently-tuned Gauntlets that can be made from it. For example, let's look at Skeleton Gauntlet (Sturdy). This is a rare lvl 24 Gauntlet that adds Strength and Defense. To make this you will need:
This adds Strength +5 and Defense +2 to the Gauntlet. If you had made Skeleton Gauntlet (Brutal) instead, you would have used twice as much Potencia's Powder and no Herba's Powder, and it would have added +10 to the Strength.
So, really, what you and the blacksmith are doing is improving the item, rather than creating it, by imbuing the item with magical powders to add the attributes you want.
The Crest Scholar makes Crests, obviously, which come in three types: Enhancements, Skills and Specials. Enhancement Crests use Onyx Lustres. For skills, each class has a specific Lustre that will be used for all skills for that class. For instance, Warriors need Diamond Fragments for lower-tier skills, and Superb Diamonds for upper-tier skills.