All heroes must wear something as they progress through the milestones. Since they obviously aren't going to run around fighting monsters naked, they wear armor and wield weapons. This is what is known as equipment. There are tons of object your hero can use in his quest to finish Quests. Heroes get equipment in towns by either buying it, or as a gift from their Guild. Depending on the type and effectiveness of the equipment, it can cost a buttload of money. Sometimes though, you may find that your hero missed a big sale or simply did not find anything interesting in a store and simply did't buy a new set of boots or whatever.
List of Equipment
When you first get your hero, you will notice that all the equipment has a minus sign and a number next to it. This means that your hero's armor and weaponry really sucks. Once your hero starts leveling up, he or she will find better stuff to wear and better weapons to use. Eventually, your hero's equipment stats will have plus signs on them. This shows that your hero's stuff finally is at adequate level for you to be proud of.
Sometimes, you may notice that your hero bought some armor that lowered his defense instead of improving it. Don't worry, that's just him/her being an imbecile again. Sooner or later, the wasted money will be regained, and the hero/heroine will find something better to wear.
When a hero has possessed a piece of equipment for a long time, it may start to degrade. The longer a hero owns it for, the more the stats will dcrease but do not worry, the process occurs very slowly indeed and a hero will usually have bought a replacement before it starts to happen.