TheGrapeOfSpades has already provided an excellent overview, but I’d like to add a few specifics and tips to complement their explanation.
Firstly, infusions that enhance specific stats operate similarly to crafting; they only amplify an existing stat on an item. In other words, if an item doesn't already have a critical hit bonus, adding 7.5% critical hit chance to a base of 0% remains ineffective.
Infusions come in three quality tiers: Tier 1, Tier 2, and Tier 3. The primary difference lies in the essence used during the crafting process. For the best results, aim for Tier 3 (epic) infusions, as they consistently offer superior stats compared to the other two tiers. For example, a max health bonus can range from 5% in Tier 1, 10% in Tier 2, to 15% in Tier 3.
You can have up to 3 Enchantments (on your tools/weapons), and you can switch between them at any moment just by holding the 'R' key. But as soon you can cast a new spell, the effect of the old one is removed. You can also cast a spell, let's say a Quake, with your dagger and then switch to an Axe to melee your foes, but bonuses on the spell will use your current weapons in your hands.
Regarding crafting, to produce all three types of item modifications, you’ll need an Enchanter’s Focus. Additionally, augmentations like the Crystal Ball, Danu's Cauldron, and Macabre Rack, and similar unlock 'decor recipes' for charms and enchantments.
Some enchantments offer unique advantages and can significantly alter gameplay or create new opportunities. For example, the Dispel spell allows the removal of immunity from the Carmut apex boss making him attacable. Another significant enchantment is Oberon’s Bounty; combined with the Quarry minor card, it doubles the yield of ores/rocks from each node – an essential factor for builders, there are minor cards for plants and trees too.
A special mention should go to the Quake Enchantment, arguably the best AOE spell in the game. Note that there is a hard cap on damage, so stacking more than 300 magic damage bonus on your gear will still yield 600-900 damage per tick. However, critical damage remains uncapped, allowing for potentially astronomical numbers like 12k damage per tick, provided you equip the right gear (Dauntless hunting knife, Dauntless lantern, and other items with crit modifications).
There are also some intriguing combinations I’ve discovered that work well with a caster's build:
Charm of Venom – nearly doubles damage, activated when poisoned.
Charm of the Herbivore – triggers self-poisoning when consuming meat, maintaining the Venom buff.
Charm of Brutality - increases damage against knocked down and prone enemies, a common result of the Quake spell.
Charm Blood, Ferocity, Spellsword, Flanking - reinforce the build even further if placed on the right items.
By strategically combining charms, enchantments, and infusions, you can significantly amplify your damage output, potentially increasing it by up to five times.