Use a merchant to repair an item.

Repairing will turn into your biggest money sink as you progress through the game, as any damage you take from enemies will equate to armor damage, which you must then repair. If you ignore the repairs (items will become yellow, and eventually red, as their quality decays), items will break and you will lose the benefits of that item until you repair it. As your armor decays you will also get armor icons appear next to your health bar on the bottom of the screen, which will change from yellow to red as the quality of that item decays.

Item damage will not occur until after you've reached level 10, and from there on it's a good idea to visit Haedrig whenever you're in town to repair items and salvage stuff by pressing A near him, then Y and scrolling to repair (or visit one of the other repair merchants to repair and sell stuff, as repairing costs money).