Crafting enables you to make many items. You first get to craft after you get your house. Every craft has its own skill level. If your skill in that craft is higher there's a higher chance of the equipment to succeed. The special skill is artistry, it increases the chance of all crafting.

Craft Used for:
Alchemy Potions
Cookery Food
Blacksmithing Weapons
Tailoring Armor
Construction Furniture