From Diablo Wiki
Bone is no longer in Diablo III.
Bone is one of the materials obtained by salvaging items in the salvage cube. Materials are used by the Artisans to craft new items. Materials are also required for the training the Artisans to do level up.
There may be other purposes for materials as well, but none have yet been revealed.
Bone is obtained from items with some apparently-organic components.