From Diablo Wiki
Item Linking is a game function that allows players to share information about item stats quickly and easily. It is implemented in many RPGs, including WoW, and though it's not confirmed for Diablo III, Bashiok is on record saying the developers like the system a lot and that he expects it to be in the game.
How it Works
The exact implementation in Diablo III isn't known (since it's not an official feature yet) but in theory Item Link allows a player to access the stats and description of an item while in-game.
For instance, if one player found a nice unique sword, they could right click on it (or otherwise select it) and that would instantly send every other player in the game a notification that they had that item. The other players could then hover on that message, or otherwise select it, and see an instant pop up box showing that item's stats.
This sort of system could be used to show off item finds, to offer found items to other players, to stimulate trading, or just to share information. It saves time and effort in describing items, saves players the trouble of Alt+Tabing of the game to check stats on a website, and is a great convenience.
If it's implemented in Diablo III.
Blue on Item Linking
Bashiok replied to a forum post about Item Linking by saying it was a feature that the developers were very fond of and that they had every intention of including in Diablo III. 
- Do you know if drops will show up in the chat window anywhere, and if you can link loot in the chat window? If not, I and many others would probably beg the team for item linking. That should be a mandatory feature in every single online game with items.
- Bashiok: We really want item linking through chat, I think it’s one of those things that is universally agreed upon. I’d be shocked if it wasn’t in for ship. And I’d make a face like :O
- There needs to be a way to show people in the game an item you just got without opening trade or dropping it.