Many different classes will occasionally offer a "drug mule" quest, where one simply delivers the item (typically) to a different town in the same region. There have yet have been no confirmed legal ramifications for possessing these items, which seems to indicate either they specifically are not contraband, or there is no contraband system within the Daggerfall Legal Framework. See Legal Basics by Anchivius, M.Z.F.
These items hint at the level of detail the Daggerfall programming team originally envisioned. Alas, they serve no functional purpose in the game beyond their resale value at the pawnbrokers and general stores.
These items, as they are named, will instantiate a random element of the base class. There is currently no known way to start the character with a specific magic item other than an Artifact. It is interesting to note the X-component is not fixed, but ranges through various other domains. Additionally, the presence of elements with non-zero values for the Y- and Z-components implies the random item capability was completely ad hoc, rather than planned and specified a priori in a professional manner.
These items were originally intended to impact and interact with the game environment, such as requiring a character to wield a torch to see in dark places, or requiring bandages to mend his injuries. Neither the delivered game, nor the current release (patch level 2.13), have implemented such logic and these items remain considered "useless". These too serve only as the odd quest item, or fodder for the pawnbroker.
Given the rather disappointing Temple/Character interaction (their function is identical to the other joinable guilds/factions present in the game), one would except the various religious items to be of little use beyond the occasional quest item. Not so! They not only offer a fair amount of enchantment points, but excellent resale value to the pawnbroker too.
† These items were originally intended to impact and interact with the game environment, such as requiring a character to wield a torch to see in dark places, or requiring bandages to mend his injuries. Neither the delivered game, nor the current release (patch level 2.13), have implemented such logic and these items remain largely "useless".