Any item requires 4 materials for crafting. You can combine any 4 materials of the same type into 1 material of higher rarity. The rarer the material - the higher the quality of the equipment created.
To access material combination window, just click any craft item. You will then be able to view all craft materials required for the item in which menu you clicked that material. You can view all materials in possession by clicking "Show all" button.
You can also access this interface directly through the Forge building in your city by selecting the "Workshop" section there.
Hover your mouse over the item. You can combine all materials by clicking the windowed icon depicted on it. You can also combine all materials available at once by clicking the ">>" icon. This would require an active Premium status:
You can improve your combining abilities at the Academy by researching relevant technologies in the "Blacksmithing" branch (e.g. you can research a technology that grants a significant chance to save a material of lower rarity once it's used in combining).
The process of combining enchantments and gems is exactly the same as combining craft materials:
Note that combining gems and enchantments requires relevant technologies to be researched in the Academy first.