Items can be found throughout the game in most scenes. The only items found through this method include Elixirs and Money Bags. Equipment are obtained as battle rewards or through the in-game store, accessed via the Pause button and in the Character menu.
You can find these throughout the game. They are potions which restore your hero to full health when used. You can carry a maximum of 5 Health Potions. Use wisely, as you will need them starting from Bloodline 3 onwards. This is where your leveling speed slows down as more experience per level is required, and you cannot rely on leveling up to restore your health. At this point in the game, it is also prohibitively costly to acquire a ring that can heal you. (It is best to charge up the ring's Heal for the battle with the God King.)
These are, quite simply, bags containing coins. You can find them littered throughout almost every scene encountered. Before choosing any route or battling any of the guards, take the time to look around the area for these coin bags. A single sack contains upwards of 30 gold. Coins are also obtained as battle rewards.
One sack that is easy to miss is located in the scene where you run across the castle's parapet, just before climbing the vines up to an Assassin. After the battle with one of the guards on the stairs, you will have to touch the balcony above you to proceed. After your hero jumps over the railing, grab the coin bag just on the outside edge of the railing before the scene changes.
Coins are used to purchase equipment in the game store. They can also be used to instantly master any equipment. The cost of mastering depends on how much Experience Points (EXP) more is required.