No doubt taking a queue from their title World of Warcraft, Blizzard have revealed a crafting system for Diablo 3 called the Artisan system. Instead of the player actually crafting the item, they'll be bringing raw materials to an artisan in a caravan or town to create the item they so desperately want. In the field you'll be able to break down weapons, armor and other items into raw materials and bring them to artisans for crafting.
Artisans though aren't always available, you'll need to earn the trust of one either through a quest or some other means. Hopefully your buddy the Blacksmith is still around.
There are benefits of this method of acquiring items include the ability to build unique sets and tweak items to strengths and weaknesses of your character. All of this is explained in a great walkthrough video by Blizzard Designer, Jay Wilson.
Additional details can be found in this Gamespot writeup.
