The vast majority of gear used by people was crafted by others, but higher level monsters dropped magic items that increased their accuracy, damage, or durability. Or, had a "slayer" affix against certain enemy types that caused additional damage toward them. For example, might find a "Silver Katana of Vanquishing" that would vastly increase damage against liches or other undead, which would have been a highly coveted item (and a nice prize for a PK who found you deep in a dungeon with practically no escape).

When you died, by either monster or player, your corpse contained all your possessions. If you could get resurrected in time or you had help you could get all your stuff back.