There are various ways you can upgrade your gear in ESO.
You can imbue, embed or infuse your gear. Imbuing your gear typically increases your gear's main statistics, such as Strength and Intellect for weapons. Embedding your gear allows you to put power ups into your gear that will give it more statistics such as intellect. At higher levels you can even infuse your gear using advanced items to make your gears even stronger.
To imbue, embed or infuse your gear, talk to Qioz - Blacksmith in Pokari (489, 511) and choose either "Embed/Imbue/Infuse gear" or "Treasure Embed/Imbue/Infuse." The first option will use your gold, and the second option will use your treasure.
Imbuing your gears
Once you click on one of the options, you can begin to imbue or embed your gear. Put your Gear in the "Gear" box and put an Etherelic in the "Relic/Gem" spot. Different level of gears requires different types of relics / gems.
Imbuing your gears is not guaranteed. If it fails, your gear will decrease in level. You can put an Auxiliary item in the "Aux." box to help your chances of upgrading your gear. You can obtain Auxiliary items from the Heaven's Repository or from other players who may be selling them.
Embedding your gears
You can embed Jades into your gears to add stats such as Intellect, Strength, Defense or Resistance. Prior to being embedded, your gear must have the appropriate number of empty sockets. You can socket your gear at Qioz by using Hand drills (obtained by killing monsters).
If your socket fails, your gear will be destroyed. You can use an auxiliary material, obtained from the Heaven Repository or from other players to increase the chances of success, and it your gear will not be destroyed if it fails.
You can also refine the Jades that you embed into your gear by combining them at the Ancestral Forge. Keep forging them until you have a Refined Jade!
Every piece of armor has it's own soul, or Ki. If you have armor that you don't need or can't use, you can keep the soul of the armor in a Soulstone. The Blacksmith will sell you Empty Soulstones. A preview menu will allow you to choose the armor and Soulstone you wish to use in the Soul Charge.
Wehn, the Pokari Minister, collects Soulstones. He will give you Virtue in return, which helps save progress in Diplomatic Quests.
The Partnership Director also accepts Soulstones in trade for assistance. He will allow you to upgrade your Clan Skills or Alliance for Soulstones.
Use it to absorb gears souls in to Soulstones.
A stone that contains the souls of armor. Both minister and the Partnership Director are collecting this kind of stones.
Demolishing Bound Gears
Sometimes you might consider some bound items useless, but you can neither discard them nor sell them.
Don't worry, just visit the Master of Coalescence(455, 424) in Pokari City to get rid of them.
Select the Destroy Bound Item function, right-click on an unwanted item in your Bag, and confirm. Then the process of destroying will start.
In the 7-day duration, you can stop the destrution any time you want. Just visit the Master of Coalescence(455, 424), and he will help you out again.
You can take the item back to Master of Coalescence to undemolish the item.
Note: 7 days later, the unwanted item will be totally destroyed, and disappear forever.