From what I understand, you don't need to actually do anything to identify items with your skill, as items will be automatically identified if your skill is high enough.
The equipment section in this FAQ describes the different levels of equipment and what level of skill is needed to identify them.
Equipment can make or break your character, especially early in the game.
Equipment has magical strength levels that correspond to non-magical
(white) to highly magical (gold). The scale roughly goes like:
To identify gray items you need 1 in Identify skill, blue are 2 in
Identify, green are 3, yellow are 4, and gold are 5.
The idea of having items identified automatically is confirmed on this FAQ:
Do I need to identify objects?
Yes, some objects need to be identified. However, if your identify skill level is high enough, they get automatically identified for you.