To upgrade weapons and equips you need to go at the temple. Click on the the blazing furnace at the middle.

Remember to unequip your weapons and armors before upgrading. Moreover, you need upgrade items to be discussed below. You need a lot of rupiahs to train items with a lot of upgrade items because failure is unvoidable.

To upgrade put your weapon/armor on your inventory, click it and then add an upgrade item.

Notes: You can't upgrade accessories. The higher lvl the weapon is the higher the price except for quest given weapons/armors. Right now, +4 is the safe upgrade lvl. Safe in the sense that it won't revert back to +0. So going +4 - +5 is a gamble. You'll either get a +5 to +7 item or revert back to +0. Moreover, upgrading to +8 to +12 will cause the item to disappear in a failed attempt. Some upgrade items are also given during quests, so be sure to do your quests. Lastly, save your upgrade ingredients for higher level equips. I suggest upgrading only if you think the next lvl equipments will take awhile to attain.

Update: Training items to +4 up to +7 would cause the item to revert back to +0 in a failed attempt.
Training items +8 up to +12 would cause the item to disappear in a failed attempt.

Tips: Check the pot near the priest before training your items. If the red bar is at 50% or more, the success rates would be better. Please note that even the bar is full there is still a chance that you will fail. Also, please donate any junk items or spare rupiahs that you can spare before upgrading.

Update: After the 02-22-2005 Patch, adding + to your items increases the price in every + you add. This means that upgrading from +1 to +2 has a different price than +2 to +3. In short, the higher + the more expensive it becomes. Weapon/Armor enchancements are not affected by this. It is still fixed. For upgrade costing you can refer to this thread: Upgrade Item Formula.

Related info: The Secrets of the "Pot"


Upgrade items:

Dipa Illa - 1~3 uncommon drops of all monsters and bosses, not sold at NPC's

Illa - 1~5 rare drop of all monsters and bosses, sold by Jeweler Ashuri by 50k

Azis - 1~8 rare drop by monsters and bosses, not sold at NPC's

Surapa - 1~10 rare drop by monsters and bosses, not sold at NPC's

Prajati - 1~12 rare drop by chaturangga monsters and exile monsters, not sold at NPC's

Om Yantra - Adds 10 Atk successful if trained on weapon and helm and Adds 10 avoid if compunded on shield or belt, sold by Jeweler Ashuri for 25k rupiah

The following can be compunded on belt/shoes/helmet/pants:

Anahata - Heart +1 sold by Jeweler Ashuri for 37.5k rupiah

Vishuda - Nerve +1 sold by Jeweler Ashuri for 37.5k rupiah

Azna - Mental +1 sold by Jeweler Ashuri for 37.5k rupiah

Mani Pura -Muscle +1 sold by Jeweler Ashuri for 37.5k rupiah

The following can be compounded on weapon/armor/shield/gloves:

Visazan - adds Poison Atk +10 and Poison Resistance 2, sold by Jeweler Ashuri for 12.5k rupiah

Luvati - adds Thunder Atk +10 and Thunder Resistance 2, sold by Jeweler Ashuri for 12.5k rupiah

Raga Mani - adds Flame Atk +10 and Flame Resistance 2, sold by Jeweler Ashuri for 12.5k rupiah

Nila Mani - adds Ice Atk +10 and Ice Resistance 2, sold by Jeweler Ashuri for 12.5k rupiah

Max upgrade on items: +12
Max enchancements (avoid/atk success, elements, chakra): 10 summed up
(e.g atk success 50, thunder 20, ice 10, poison 20) = 10
(e.g. atk success 100) = 10
(e.g poison 100-100) = 10

For additional info:
http://www.tantra.com.ph/gameguide/intro-items.aspx
Enhanced Version with images => http://forums.tantra.ph/index.php?showtopic=125