Like so many other things, items have levels. (ilvl, for short.)
In Classic Diablo 2 / Lord of Destruction, ilvl is invisible, but an item's ilvl is usually equal to the mlvl of the monster which dropped it.
During item-quality calculation, if an item's ilvl isn't equal to or greater than that item-type's Set or Unique ilvl, it will drop as a double durability Magic or triple durability Rare item (respectively) instead.
ilvl also limits which affixes can appear on the item, (It's what stops you from getting a Godly Quilted Armor of the Whale in the Blood Moor on Normal, for example,) as well as the maximum number of sockets an item can spawn with.
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