From Diablo Wiki
Blizzard's official Caravan FAQ, released at Gamescon, August 2010. Linked terms point to other wiki articles that add much detail to the barebones info in this FAQ.
Diablo III Caravan FAQ
Q: What is the caravan?
A: The caravan is a persistent group that follows the heroes across Sanctuary, providing a centralized hub for players to find quest givers, crafters, and other important NPCs. As your character moves through the world so too will your loyal band, setting up in specific locations to remain close by should you need them.
Q: Who are the artisans?
A: In order to access the professions in Diablo III, you’ll need to gain the loyalty of various artisans through your travels in Sanctuary. The blacksmith, mystic, and jeweler will each provide unique services over the course of the game.
Q: What do the artisans offer?
A: Skilling up your artisans will unlock unique recipes, granting your character access to benefits that may not be found anywhere else in the world. The blacksmith crafts weapons and armor, and can add sockets to some items. The mystic creates scrolls, potions, magical weapons, spell runes, and charms, and can also enchant items. The jeweler crafts gems, amulets, and rings. The jeweler can also remove gems from socketed items and can combine gems to improve their quality.
Q: How do I find the artisans?
A: Finding the artisans will be part of the main quest. Each artisan has been fleshed out to include their own story and quest line.
Q: How do I use the artisans?
A: You’ll collect loot as a reward for slaughtering the forces of the Burning Hells. Unwanted items can be salvaged in your inventory, converting these goods into raw crafting materials -- higher-level items are salvaged into higher-level materials. You’ll then take those raw materials and hand them over to the artisans, putting them to work crafting or enchanting for you. Upon returning to the caravan after a lengthy foray, you may also find that the artisans have been hard at work plying their trade for your benefit.
Q: How do I salvage my items?
A: Players will find an item while progressing through the main quest that will allow them to convert unwanted gear into crafting materials from the inventory. This item will not take up any inventory space. This should be a more satisfying option for offloading unwanted loot than the alternative -- dropping things on the ground or making frequent trips to a vendor.
Q: Why are you including crafting professions in an action game?
A: Professions add depth to the item collection gameplay that drives the action of Diablo III. We want to provide players with an alternative way to acquire gear, potions, and other randomly found items. We also want to provide additional forms of customization for players -- adding jewels, enchants, or sockets to existing gear allows players to further tailor their characters. Many rare crafting recipes and materials are only found as world drops, enhancing the item acquisition process by increasing the diversity of items dropped by monsters.