Shards effectively have quality levels. Instead of adding more ingredients like Alchemy and Blacksmithing, increasing one's Sagecrafting skill allows for the use of more advanced shards.
Sagecraft by the Numbers
Three quality levels:
Seven shard types:
Four gem categories:
All characters can combine Cloudy Shards into gems innately. At level 2, you can combine Lambent Shards into gems. At level 6, you can use Pristine Shards.
Reaching level 3 in Sagecrafting lets you fuse identical shards into a higher tier, much like Diablo II's Horadric Cube, or Torchlight's Transmuter.
Reaching level 8 unlocks the epic gems recipe category.
Reaching Level 10 allows a master Sagecrafter to extract gems from equipment, with no harm to either gem or armament.
Every time you increase your Sagecrafting skill you also increase the chance of finding shards in the first place.
Like Alchemy, there are set combinations to create certain effects. Unlike Alchemy, you get a preview of the results of the transmutation before performing it, so you're never sagecrafting blindly.
There are 196 different combinations (7 shard types, 2 shards per gem, 4 categories), but there is some overlap; For instance, Fire + Protection and Ice + Protection both give + Physical Damage when used as a weapon gem.