Each item you craft adds some crafting points to your total. When you reach 100 crafting points on a tier, the next tier is unlocked, provided your hero is eligible for that (for example, if you are level 18 and reach 100 crafting on tier 2, you'll have to also reach level 20 for tier 3 crafting to be unlocked). After reaching 200 crafting points on a tier, you unlock the chance to create rare (blue) items. Now only crafting attempts that result in blue items will reward you crafting points. At 300 points you unlock legendary (yellow) chances. Now only crafting attempts that result in yellow items will reward you crafting points. At 400 points you unlock epic (purple) chances. No more crafting points for you in this tier.
You can find a complete guide
here.