Item Identification
Any magic armor, weapon or shield that you discover will need to be identified before anyone will know it's magical attributes. (ie. Supremely accurate, Vanquishing.) Simply use the skill, and target any unidentified magic equipment to learn more about it's properties.
Training Item Identification
To train item identification simply use it on a piece of equipment with magical attributes repeatedly, even if said item has already been successfully identified.
Rares Factory
On Angel Island, the Item Identification skill has a secondary function as part of the Rares Factory system.
Use of the skill on any rare items you may find will reveal if they are part of this system.
Note* Any items which are not part of the system will give the message "you determine that the item is of unknown origin" when inspected with item identification.