From Diablo Wiki
Durability refers to a property on items that is an in-game indication for how damaged a piece of equipment is. Characters need to spend gold to repair items to keep them in usable condition. Items that run down to 0 durability become unusable, until they are repaired.
The D3 Team has varied their stance on durability throughout the game's development. Early on there was no durability on items, and the team said it might remain gone, since repairing was annoying. As of August 2010 though, and the reveal of the Artisans, durability was back, with durability values on all items and a repair option in the blacksmith's interface.
Most equipped items had durability in both Diablo 1 and Diablo 2, and had to be repaired periodically. In Diablo I items that went to zero durability vanished and were lost permanently. This penalty was softened in Diablo 2, with items simply becoming unusable once they went to zero durability. Other durability modifications were also introduced, including item modifiers that granted extra durability, self-repairing items, and a convenient "repair all" button on the various NPC blacksmiths.
 Loss of Durability on Death
Diablo III will carry a similar penalty to death in durability loss that is seen in World of WarCraft which is, namely, a 10% durability loss of all equipped items. The lost durability is not from the current amount left on the item, but 10% off of the maximum durability, meaning that items can and will break with enough death, or if they take enough of a beating.
 Blizzard on Durability
Item durability has been mentioned in passing a few times, but no detailed comments on it have been forthcoming. Jay Wilson mentioned it while talking about death and other gold costs in an interview in mid-2008. 
- We have not actually decided on the final death mechanic. I can guarantee that you will not lose experience. We are not urging to big penalties for death. But we want enough of a penalty to be there, so that death has meaning! Like to lose a little bit time, some kind of detriment... We do not currently have a durability loss (to equipment), but some kind of ... a gold cost is actually not so bad. And having the player to waste some time, that is certainly an element. Generally we kind of rely on the effect that players do not want to die. You know, you just do not want to. So there is no real reason to add a further "ding" to them for something happening that was already unfavorable to them. But we have not got our final mechanics on that, yet.
- Question: I looked around but wasn't able to find anything about if durability will be making a return, i kind of hope it doesn't as it was sort of a pain. Then again it is also a good way to keep players from getting super rich, so is it coming back?
- Bashiok: Probably.
As of August 2010 durability was indubitably back in the game, since it was seen on all items in the Caravan movie, and the NPC Blacksmith had a repair icon on his interface. Note the 25/25 durability listed for the buckler in the image to the right.
|Items of Diablo III  Item Basics Normal Items Legendary Armor I Legendary Armor II Legendary Weapons 1h Legendary Weapons 2h Item Sets|
|Item Basics||Item Modifiers||Inventory||Artisans||Merchants||Miscellaneous |
|Armor - Class-Specific||Weapons - Class-Specific||Crafting Items||Other Items |
|| • Blacksmith Plans
|Waist||Wrists & Hands||Legs & Feet||Head |
|| Voodoo Masks - WD|
| Chest Armor
|| Amulets cont.
|| Rings cont.
40) Puzzle Ring
|| Sources - Wiz|
|| Fist Weapons - Monk
|| Mighty Weapons - Barb|
|| Daibos - Monk
|| Bows |
|Item Sets |