From Diablo Wiki
Legit means "legitimate," and is a term most often used to refer to items. A non-legit item is one that's been duped or hacked in some way, or obtained by using duped items (usually duped Runes to make Runewords) which was an unfortunately-frequent occurrence in Diablo II. Many players in Diablo II eventually insisted on using only self-found items to be sure they were legit.
Diablo III is being designed to forbid and prevent all types of hacking and duping. Of course so was Diablo II, but Blizzard feels more confident this time around, thanks to better technology and their years of experience defeating hacks and other cheats in World of Warcraft.
- See more reference terms.