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In diablo 3 magic items are automatically identified. To identify rare items you right click on it but it doesn’t use any items or anything. You can’t sell it or auction house it.

What is the purpose of unidentified items?

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This question falls under "Why did they design it that way?" which is considered not constructive for this site. –  Raven Dreamer May 25 '12 at 16:09
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@RavenDreamer I would say this is very much answerable, as noted by the... answers, including a source from a developer. –  Resorath May 25 '12 at 20:33
    
@Resorath "Answerability" is not the criteria for keeping a question open. Site policy is to close these kinds of questions, and I see no reason to make an exception in this case. –  Raven Dreamer May 25 '12 at 20:59
    
@RavenDreamer Where is this site policy listed? And what is the purpose of the policy? –  ElephantHunter Jun 11 '12 at 22:59
    
@ElephantHunter On Meta. –  Raven Dreamer Jun 11 '12 at 23:04
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closed as not constructive by Raven Dreamer May 25 '12 at 16:09

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up vote 7 down vote accepted

Originally there were Scrolls of Identify in the D3 beta, like in Diablo 1 and 2. Last year, Bashiok (D3 community rep) posted some of the reasons for keeping the identification mechanic:

We still have scrolls of identify, and they stack pretty high so we don’t have any need to go the tome route. We reserve the need to identify items to rares and legendaries, and it's not as common as it was in Diablo II to have to identify something. We kept identification because we like that it's a different moment of discovery than simply seeing what drops, and it helps break up the action.

Source

The scrolls were eventually removed, but the mechanic was kept in the game. Jay Wilson (D3 game director) talked a bit about this change in January, when it was announced:

Let's start off small: Scrolls of Identification are no longer in the game. Unidentified items and the act of identifying them is still very much part of the game, but now when obtaining an unidentified item you'll simply right click it, a short cast timer will occur as your character examines the item, and it will become identified. We love the double-discovery of finding a present and then unwrapping it, but we don't think it requires a physical item you have to find and keep in your bags to get the same effect. From now on you'll just be able to inherently identify all your items, no need to carry scrolls.

Source

This discovery aspect that he mentions goes way back in the Diablo franchise. In D1, items were unidentified until you took them to Cain to identify them. Monsters were completely unknown at first, but the more of them you killed, the more info was displayed on their hit points, resistances, etc. The whole game was a mystery as you figured out what was going on, why all these demons were rising, and who was behind it.

So there is a game design element to it, as well as a nostalgia/traditional element.

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Updated answer with more information from the beta. –  Wikwocket May 29 '12 at 15:51
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Blizzard said the reason is to that identification is an exciting moment in the process of finding a powerful item. They wanted to bring that from Diablo I and II but without the cumbersome need to carry scrolls / tomes of identification, and without the need to do it on every mundane blue.

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They forgot to mention that all yellow item drops are only exciting to people 10 levels below you and so the moment of excitement has been moved to when you win an auction. –  James May 25 '12 at 16:03
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I get zero excitement from winning an auction. –  Resorath May 25 '12 at 16:05
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It's like unwrapping a present: you can't sell it or re-gift it until you unwrap it.

It doesn't have a utility—it's just a continuation of a beloved game mechanic from earlier in the series. Psychologically, it also makes you want more loot.

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It is part of the addictive surprise of looting an item.

In Diablo 2, all items we're unidentified, even magic (blue) quality items. This meant every time you picked up an item, there was a surprise in what it was. The cost of the identifying scroll (or Cain, who would do it for free) was never really a gameplay element.

In Diablo 3, blue items start out identified in response to players who did not want to sift through the hundreds of blues they got during a run. The keen player can recognize the attributes of an item just by the name of a blue and choose not to pick it up. The attributes of rare items however can not be identified just from the name of the item.

A special case exists for unique and set items. The attributes of these items can be recognized on the spot due to their name, however they can have varying strengths due to randomly rolled attribute ranges. In a sense, one instance of a unique can be more powerful than another instance, and the act of identifying it is essentially gambling the stats.

To answer the other part of your question, you can not sell unidentified items because the auction house was not meant as an outlet to gambling. When you buy an item which you do not know its stats, this is essentially gambling. Since the Real Money Auction House would thus become a venue for gambling, Blizzard would have to be licensed as such.

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