Items are things that can be carried by characters or contained in something's inventory. Items can be clothing, armor, weapons, tools, magic items, treasure, very small rocks, or most nearly anything the module designer can think up. Unlike in NWN, all NWN2 item icons have the same standard size. 
Some items can provide enhancements when worn or used (or in some cases, just being in inventory), while some are only related to quests. A variety are used as components in crafting. Bags can be used to store items with a weight reduction (the highest being Bag of Holding at 100% reduction).