Runeword

Runewords were a feature added to Diablo II in the expansion pack, which used a combination of runes in socketed items to "craft" a completely new set of stats for it. This feature will not return in Diablo III, though there will be many other types of item crafting and creation.

There are runes in Diablo 3, but they are socketed into skills rather than items.

Removed from Diablo 3

The D3 Team's rationale for not bringing runewords back is based on several factors. The designers thought that RWs were overpowered and led to a lack of equipment variety, but more fundamentally, they think they've got better ideas for items in Diablo 3. Better item variety, and better forms of item crafting. Here's Jay Wilson speaking in December 2008.[1]

...we took a few things out, like Rune Words, essentially because Rune Words is a very simple crafting system, and we're planning to do something different there.

Diablo II Runewords

These runewords allowed players to socket certain sequences of runes into weapons, armor, helms, or shields, to create new items with impressive lists of stats, making them much like Uniques. Thanks to the new very high level runewords that were added in the v1.10 and v1.11 patches, runewords became the most powerful type of item. This caused some mudflation, especially due to all of the rune duping that went on to provide the extremely hard to obtain high level runes.

• See a full listing of Runewords in the Diablo II wing of the DiabloWiki.