You can only dismantle items with a level requirement of 31 or higher.
Every item you dismantle will give you a Master Rune Fragment and different Rune Fragments.
Master Rune Fragments are needed for every item you create. There are 4 different kinds of
Master Rune Fragments, Magic(Blue), Rare(Yellow), Epic(Orange), and Legendary(Red). Each item of that rarity will give you one Master Rune Fragment. Set items give Epic Master Rune Fragments.
Godlike items give Legendary Master Rune Fragments.
The other Rune Fragments are used to add specific stats when creating items.

Every 5 Rune Fragments makes 1 Rune, same goes with Master Rune Fragments.
The total cost shown is the same for more runes, so make them in bulk when you can.

This is what runecrafting is all about.
Essentialy you can pick 4 stats you want the item to have and get another 3 random stats, so it has 7 stats all together.

You can only do runecrafting on Magic(Blue) or Rare(Yellow) items, the rarity of the item doesnt matter.
The only stat that matters (because the rest get switched) is the items stat. In the case of the picture it is the 270 all resistence.
Enchants on the item get wiped.
Make sure when you make your item, the item stat is very high if not max.

You can only add one Magic(Blue) Master Rune so add this first, Next you can put in 2 Rare(Yellow) Master Runes and finally end with a Epic(Orange) Master Rune. This is the most efficient way.

You can only use certain stats with certain items so check each rune for what its compatible with first to prevent extra runs to the bank.
Make sure you find the best combination(i.e. you can't socket your cape with damage runes so don't socket all resistence over +elemental dmg on your ring, since you can just socket the cape with it.)
You need 3 of the rune of choice to get its highest roll (i.e. highest Willpower roll is 51).
In the picture above I am adding Willpower, Lightning Damage Boost, Critical Hit Chance, and Damage.

You can add up to 40 Essence Capacity with Master Runes, but its cheaper to add just 30 since you can use Capicitive Essence to raise it to the cap of 50 and can buy the essence from the vendor.
Use two Rares(Yellow) and one (or two) Epic(Orange) Master Runes.

Enjoy your new item with 4 chosen stats and 3 random stats.
If you want you can do it again if you got 3 really bad random stats.
If you like what you got then go throw some essence of choice into it and if your rich then re enchant it a bunch till you get your enchant of choice and reroll the random stats till you get max roll.

Some rune names are unspecific to what they do. Here they are.
(still haven't made them all)
Unfettering - +CC Resist (+200 for 3 runes)
Soul Drain - Mana on Kill (+13 for 3 runes)
Bonus Attribute - + to All Attributes
Blink - Chance to Teleport Randomly on Getting Hit (5% for 1 rune)
Freeze - Chance to Freeze on Weapon Hit (5% for 1 rune)
Full Health - Chance to Fully Heal on Killing an Enemy (5% for 1 rune)
Daze - Chance to Stun for 2sec on Hit (5% for 1 rune)
Forceful Revenge - Chance to cast Angry Stomp on Getting Hit
Slow - Chance to Slow Down on Weapon Hit
Burnstrike - Bonus Damage on Burning
Retreat - +% Movement Speed when under 20% HP