The gear your characters can equip can be divided according to its quality. The most common equipment being green, then blue, purple, orange and finally red which is high-quality equipment. During the early stages of the game it is unlikely that you will get high-quality equipment.
As the game progresses you will be able to slowly power up your equipment by either consuming Equip or using Advanced Materials. You can earn Smelting Points from smelting the equipment you have in your storage which you have no use for and they can then be exchanged for Equip. Rare Materials are difficult to get and can only be obtained from the Equipment Smelting and the Smelting Shop so you need to be careful that you do not waste them. The Virtue Sets are not powerful and it is advised that you don't upgrade them into Orange quality. Your equipment can be enhanced in exchange for gold, the limit of enhancement is dependant to your main character's level.
The distribution of equipement is important, you should give high-quality hoods, robes, and boots to your tank heroes and your AOE and damage control heroes should be given high-quality necklaces and shoes. During the later stages of the game you may wan to consider collecting powerful equipment sets for your main heroes as these can provide additional attributes.