They will be equipping items by themselves. You can provide them some equip and, if they have nothing better, they will use it.
You can control them in between levels, when you're offered the option to switch between companions: there you can modify their skill points as well as equip. Your AI companions will "level up" automatically when you aren't playing them.
So, if you select the dwarf and customize him (skills and equip) and then switch to some other one, the AI will take control of the dwarf and rearrange him. Taking the dwarf back again will restore him to YOUR last setup, with all the progress he made being available for reassignment.
About this, the game is very blurry and non trasparent.