Loot is the term used for items that can be taken from other players (in PvP) or NPCs. When you defeat a monster or another player, they may drop items on the ground which you can pick up by left clicking it or walking near it and pressing the icon of a bag in your hotkey menu. Not all NPCs drop items and not all NPCs are able to be killed for items. You may also receive items from completing quests.
Highlighting an item in your bag or in your hotkey bar will allow you to view a description of the item. The color of the item's name will represent it's class. Grey is not special though the item itself may prove useful if equipped. Gold items quest items which can not be traded or sold.
Bags can be considered your inventory or your backpack. It is the space you are allowed to use to carry items that you have not equipped such as loot. To access your bag, you can press the bag icon on the lower right hand side of your screen or use the hotkey B. Moving your cursor and hovering it over an item allows you to inspect an item and see it's characteristics. To wield or equip an item, you can right-click it. If you are in a store and you right-click, you will have sold your item. Bags only provide a limited amount of space to carry items.
Merchants and Stores
NPCs who have the sword and shield symbol above their heads sell equipment. NPCs who have the vial symbol above their head sell potions. All NPCs will accept any kind of non-quest and non-bound items but each merchant will sell a specific kind of item as described under their symbol.
Commonly Confused Items
Many users have difficulty grasping the concepts of the following items: