The Anvil is used to combine items for crafting Melee gear, Archery gear, Magic gear and Enchanting.  Equip your Forging Hammer Forging Hammerand click on the Anvil. Have the proper ingredients in your inventory and a selection of items you can make will be shown. Select the one you want and 'Make' with an associated percentage value will appear below the picture of the item to be created.

See the Forging page for a graphic description and more recipes.