You can open the crafting interface by using any anvil or cauldron.
The top row of the interface is your "input," or items to be combined or dismantled. The bottom row is your "output," where the results will be placed.
You can "Dismantle" magical weapons and armor into various arcane shards. These can then be "Combined" with non-magical weapons and armor to create new magic items with different stats. The shards you get when dismantling are somewhat random and you may not always get everything you need to completely reconstruct the item.
A Lesser Arcane Shard can be used to recharge a wand that has not been fully depleted.