In Neverwinter you can upgrade items with enchantments or companions with runes. Item with enchantment slots will have small squares on left side of an icon.
You can see in the item's tooltip what enchantment slots it have, and those slots can be:
Offensive Slot, Defensive Slot, Utility Slot, Armor Enchantment Slot, Weapon Enchantment Slot for equipment, and for companions: Companion Offensive Slot or Companion Defensive Slot.
Some runes have only one property, thus can be put only in few items with such enchantment slot, but most runes have dynamic properties changing depending on what slot they were put in.
Enchantments and runes have ranks, higher the rank, better bonus is. You can convert 4 enchantments of same kind to one higher in rank. Fusion window can be shown after double-clicking enchantments.
Rank increase isn't guaranteed, for example 4 runes rank 1 will have 95% chances to successfully create one rank 2 rune, but four runes from rank 5 have only 40% of fusion success. If fusion fails you will loose one rune.
You can protect fusion process by adding Preservation Ward, if you will fail, Ward will disappear instead of one rune. There is also Celestial Ward giving fusion 100% chances for success, but ward is consumed..
Removing enchantments will cost Diamonds, higher the upgrade is, more diamonds you'll have to pay.