Tailoring
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First of all, you'll need wool (for help there, check here) and knicks of some sort. Existing knicks are as follows:

KnickDropped By:
ImpfeatherLvl 3 and up Imps, lvl 3 Skeletons
SnakeskinLvl 10 and up Snakes
BoneLvl 5 and up Skeletons
BeetlewingAll Beetles
OgrewaxAll Ogres
Thak HideAll Thak Knights
Troll HairAll Trolls
DragonscaleNot obtainable

Equip your Knitting Tool as shown here.



Then, head to a loom and click it to bring up this menu.



So, first choose what item you'd like to make (red circle), then the knicks to make it from (orange circle). The blue circle shows you your chances of creating the item. So, when you've got it all selected, click the create button, and your Battle Text box should resemble this.



When the blue bar is filled, you'll be told whether or not you've created the item, and if so, it's quality.