World of Warcraft Item Upgrades
Upgrades to items can be used to boost the stats of a particular item. Depending on the upgrade type, it may increase an item's Mark Level or Rarity and boost additional stats.
Each item has a track for upgrading it. Each upgrade increases the cost of the following one by a certain amount.
Item Level
The value of an item's stats base increases as it is upgraded. This value is the sum of the perks that are leveled up (attack magic attack and defense). The cost of upgrading items can be high, dependent on the upgrader and the type of upgrade you choose to make. This is due to how many perks need to be replaced to allow the item to be upgraded.
It can also be used as a gating requirement when queueing for dungeons, raids and scenarios. It also serves to limit the amount of PvP gear players are able to wear, since PvP is limited at lower levels. The average level of the item can be found in the character sheet.
When deciding to purchase or sell gear players can evaluate the item level. It's a good indicator of an item's quality and the amount of damage it's able to deal. The level of an item can be used to compare items when evaluating the inventory of a vendor.
On your PC, you can see the level of the item by pressing ALT or by using the left stick on XB1 or PS4. This will display the full item description, including its value. You can also find it by hovering over an item and typing /itemlevel into chat.
There are several theories about how the level of an item is calculated. One theory suggests that the item level is determined by an equation that determines the worth of the stats of an item really are. It considers the fact that different perks have different values and that sockets have gems that increase the overall value of the item. This can lead to an item's ilvl calculated, which is often very close to Blizzards actual item level.
However, this is not the only factor that determines the ilvl of an item, since the size of the area the item dropped in can alter the value of its stats, such as by adding an additional level to its crit rating or haste rating. This means that items that drop at higher levels will have more value than items dropped in lower-level instances.

Item Stats
Item stats are a big element in what makes or breaks an item for players. The game utilizes them in many ways to encourage players not to limit themselves to a single weapon and to motivate them to try out other weapons. The stat mods of an weapon increase the base stats. These stat mods are then increased by the player's level.
Upgrades to the item add by boosting certain stats on the item. The rarity of an item determines the upgrade cost. For example, a grey or white item can only be upgraded once, whereas an item with rare levels will be upgraded multiple times, at higher costs.
Another method of altering the stats on an item is by affixing it. These are special stat boosts that can be added to an item by the player and they come in all sizes and shapes. Affixes are used to provide items with extra damage or special capabilities (such as revitalizing dead or reducing cooling downs), or to make them unique by putting a name on them.
All affixes are currently re-rolled by selecting them in the upgrade menu and pressing the green button. This process will cost the player a specific amount of gold and other items which can be used to add to the upgrade gauge in the same way as the other rerolling options.
In addition to Rerolling affixes and rerolls, players can select which of the available stats to keep on an item after it is upgraded. The range of stats determined by the item's level. However each item will have at least one stat in that range unless they are an exclusive item or the item is a God Roll from a raid boss.
This is another thing that could be changed by adding an option to upgrade the equipment without having to reroll the affixes, or selecting which stats to boost. But as with base equipment, this would need to be done on a per-item basis and the item compare interface would not display all the possible stats that were gained or lost at the same time.
Item Luck
The Luck stat of a player boosts the chance of finding items as well as the properties spawned by loot and the intensity of these properties. It doesn't, however directly affect damage or the ability to upgrade items. It gives players the chance to upgrade their equipment earlier in the game. This is more useful in early game runs since players tend to prioritize defenses and weapon scaling over raw damage gains.
Luck can also boost the likelihood of upgrading items at the Blacksmith. This is not to be confused with the Blacksmith's overall chance of upgrading, which increases with each item level and can be further increased through the use of an anti-material such as a Scroll of Strength or a Jewel of Blessing.
Armor, shields and weapons have an initial Luck value of 40. item upgrading can be improved with golden ingots or spined leather (depending on the type of material) to increase the value of 40 luck or to boost the luck of the item to 140.
Furthermore there are certain items, such as the Hollow weapon, which is infused with Hollow can be used to boost the damage of any damage-dealing skill by five percent. These items can be purchased in the shop or created using the right ingredients.
Item Failure
Not all upgrades work. Cash shop items can be used to increase the success rate of an upgrade or to prevent players from losing their item in the event that it fails.
When you upgrade an item the success rate is shown in the Honing UI. The percentage is the chances of successfully upgrading that item, and it can be increased by adding Additional Materials or Special Materials. The percentage of success can only be increased so high, and the probability that an upgrade will fail can't exceed 100%.
The Luck of an item can also influence the success of an upgrade. All items have a base success rate of 25% and each item with Luck increases the chance of success by an additional 5%.
Note that item upgrades are rendered above the inventory items therefore enchantment glints and other effects may be masked by the overlays. If you wish to disable the upgrade overlays, the config option decoration.renderUpgradeOverlays can be set to False in the Item Upgrader CORE client config.