To repair your own items, you need a repair hammer in your inventory; you then need to right-click the hammer and then left-click on a damaged piece of equipment. However, if you've allowed the equipment's durability to go too low for your current "Blacksmithing" ability level (the required ability level will be shown in the equipment's tooltip), you won't be able to repair the equipment at all. (As I've posted elsewhere, I think this whole system still needs some work, but that's how it is currently.)
As for a forge etc., there is a blacksmithy area (with an anvil, etc.) near Cyseal west gate, but I'm not sure myself how/whether the tools found there can actually be used. They might not be fully implemented yet, or someone else might be able to help.
