Enhanced Items - If I'm not mistaken, this is when you take a finished item and improve it, e.g. plumed pickaxes, wrapped hammers.

Finished Items - This is when you assemble a number of parts into a single item, e.g. swords, tools, fishing rods.

Parts - These are materials that have been converted into specific pieces of a weapon or armor piece, e.g. lance heads, sword blades.

Materials - These, if I'm not mistaken, are the building blocks for everything else, e.g. nuggets, ingots, lumber, planks.

Decorations - Not entirely sure, to be honest. . .