Item leveling means that experience gained while using the item, will give the item itself a fraction of expirience allowing it to gain level and Upgrade points(N Per level).
Upgrade points can be used to upgrade item attributes:
Percentage points are upgrades in increments of 0.25% or even 0.1% for stronger attributes(each attribute has its own "upgrade rate" per point.
To allow customization, a "reset Upgrades" function would remove all upgrades and give back all Upgrade points.