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40d:Legendary artifact
Dwarves in strange moods will create legendary artifacts: unique, "named" items which are of unsurpassable quality (and usually cost). An artifact is the ultimate expression of a dwarf's desires, fears, memories and hopes in art form, and each dwarf will produce only one in their lives (or die trying). Dwarves that create an artifact are always granted the status of legendary unless they were possessed.
Dwarves drop artifacts in the workshop as soon as they are made. They cannot be traded, but be used just like other items, except for clothing and with some limitations to armor and weapons (see below).
Artifacts cannot be destroyed unless lost in a chasm or dropped to the magma. They can be stolen by marauding parties; an artifact lost to you will have a note to that effect in the Artifacts screen(press l).
Construction
Dwarves will use anywhere from one to ten items in their construction. If you view (q) the workshop a dwarf has seized while the dwarf is in it, you can see what materials he or she plans to use (see strange moods for further details). Once the dwarf has started to construct the artifact, you can also use t to see exactly what materials they have claimed.
It's worth noting that artifacts can be made out of materials that normally could not produce the base furniture or item in question. For example, you may get platinum armor, stone beds, or even bone doors. Further, these artifacts could be produced in workshops by professions that could not normally build such an item, such as the previously mentioned bone door being made by a bonecarver in a Craftsdwarf's workshop.
Workshops which normally require fuel (Forge, Glass furnace) do not require and will not use fuel to make an artifact at that shop. Magma versions which lose power, however, will immediately cause the moody dwarves mood to end (with disastrous consequences).
Usage
Artifacts of types which can be built (furniture, animal traps, chains, etc...) can be used as normal. Often artifacts of this nature are used to meet noble room requirements or establish high-quality dinning halls as a single artifact is typically capable of bumping a room up to royal quality on its own, however a particularly poor artifact may turn it to at least grand. Object types which are used for storage in stockpiles (bins, barrels) will be used by your dwarves without regard to their status.
Object types which require a dwarf to wear or use the item will generally not be used by your dwarves, with the exception of artifact weapons and armor.
Artifact weapon or armor will only be worn by heroes and champions (even if they are novice in the artifacts weapon skill). be warned that when a dwarf equips an artifact he will never drop it v0.28.181.40d. Artifacts can not be marked for dropping and changing the weapon or armor setting in the military screen wont help either. Your only option seems to be to get really lucky and have it wrestled out of his hand in combat. The only other option: death will free up the artifact for reassignment. This means that an artifact axe can be wielded by any elite or better soldier, but could not be used for woodcutting. Similarly, an artifact pick will never be used by your miners.
A dwarf may carry around several artifact weapons in each hand [Verify] v0.27.176.38c. Of course, you might not see a champion swordsdwarf wielding eight artifact adamantine scimitars as a bad thing.
Quality
Artifact items have a value modifier of 120×. This is applied on top of the item's base value, its decorations and the value of all materials used in its construction.
Artifacts will automatically have one "free" decoration of the same type as its base material. For instance, a "Perfect Ruby" might have "Images of mangrove trees in Ruby". This decoration doesn't consume additional materials: in the above example, only one ruby was used.
Item types which normally require multiple objects to create (such as Platemail) will cause the moody dwarf to acquire that number of objects, but each such object will also contribute a decoration - basically, the item receives multiple free decorations. For example, artifact gold platemail will use a minimum of 3 objects (3 bars of gold), and have 3 gold decorations.
Artifacts can range in value from 2,400☼ (all-stone furniture or finished good) to 7,200,000☼ (full-decorated adamantine Platemail). Since immigration totals are, among other factors, based on your fortress's "Created Wealth" (and held/worn items count double in the total), expensive artifacts are often the driving factor behind how many immigrants show up in the first years.
Artifact armour and weapons have a high damage/protection modifier, at least greater than a similar iron item of basic quality, though even steel artifacts will not surpass basic quality adamantine items. Note that the material of a crossbow, artifact or not, only improves its damage in melee, while the quality of construction improves both melee damage and ranged accuracy. [Verify]
It is possible artifact makers may occasionally glitch in the number of goods needed, with a corresponding increase in value (eg, this monstrosity).