Like so many other things, items have levels. (ilvl, for short.)
In Classic Diablo 2 / Lord of Destruction, ilvl is invisible, but 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.
The ilvl, in conjunction with the quality level (qlvl), 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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