Charms are special magic items that grant magical enhancements without needing to be equipped to do so. Charms provide their abilities simply by being in the "Backpack" section of your character's Inventory. They do not function if placed inside your character's Stash or inside a Horadric Cube (even if that Horadric Cube is located in your hero's Backpack). Charms come in three sizes: Small, Medium, Large.

Charms can only be Magic. There are no Rare, Set, Crafted or Unique Charms.

Smaller is actually better as far as Charms are concerned, however, some Magic Prefixes and Suffixes are only available on the larger Charms.

When using Charms you can really dig yourself into a hole where you cannot pick up any more items. It's best to pick only the best Charms to keep and throw the rest away. As you find better Charms, get rid of older ones. Try to keep some space to pick up one or two large items. If you want to totally fill your inventory with Charms you certainly can. It's up to you. Just don't be surprised when other party members pick up good equipment dropped by monsters because you don't have enough room in your Backpack to pick them up!

Store Life or Resistance Charms in your Stash and equip them before facing a tough boss.

The artwork for Charms are not tied to their stats. You will receive a Charm that will look like one of these:

Small Charms

Medium Charms

Large Charms