One of the big changes in Burning Crusade is Blizzard made a real
effort to give people alternate ways to improve their gear. Raiding
still presents the most diverse gear out there. But in addition PvP
gear, Badge of Justice gear, and crafted gear also have a significant
progression to them. It can be a bit confusing to sort through all the
gear options; these notes are some rules of thumb to help you look for
gear upgrades.
Every item in the game has an Item Level,
a hidden stat which is Blizzard's estimate of how good the gear is. In
general gear from specific places has certain item levels. Here's a list of gear by item level (cribbed from Wowwiki):
105-115 Entry level 70 crafted gear (Battlecast, Spellstrike, Spellfire, Primal Mooncloth, etc)
110 Heroic instance epics
110-115 Early Badge of Justice gear
115 Karazhan loot (other than Prince)
115 Heroic Magister's Terrace
120 Tier 4 item set (does not count set bonus)
123 Gladiator's PvP gear. Season 1 arena, obtainable via Honor now. ~10k-15k / item.
125 Prince Malchezaar loot
126 Veteran's PvP gear. Obtainable via Honor. ~14k / item.
127 Some crafted items (Engineering goggles)
128-141 SSC, TK, Zul'Aman loot.
128-136 Some 2.3 Badge of Justice gear
133 Tier 5 item set (does not count set bonus)
136 Merciless Gladiator's PvP gear. Season 2 arena.
141 Vindicator's PvP gear. Obtainable via Honor, ~15k / item.
141-151 Black Temple, Hyjal loot
146 Vengeful Gladiator's PvP gear. Season 3 arena.
146 Tier 6 item set
Just
because gear has a higher item level doesn't mean it's better. It
depends on the stats, which in turn are allocated out of the item's
budget. For example, a level 115 item has 115 points to spend. Each +1
to intellect, agility, strength, and spirit cost 1 point (stamina is
0.67), +1 mana/5 costs 2.5 points, etc. An item is only going to be
useful to you if the stats complement your character. Obviously +int is
useless to a Warrior. But +spirit is also somewhat wasted on mages and
warlocks, so a lower level caster item might be better if it doesn't
have any spirit. There are also more subtle differences depending on
your class and playstyle. Strength and agility both have the same item
budget cost, but cat druids prefer agility to strength. Bear tanks want to be on the lookout for items with their armor value in green (like the Verdant Gloves); because of our 5.5x armor multiplier they benefit us greatly.
This question of item budget becomes
particularly important when looking at PvP gear. PvP gear has stats on
it that are mostly not useful in PvE raiding, particularly Resilience
and Spell Penetration. PvP gear also tends to be
missing stats you want in PvE, like +hit. But even with the mismatch
sometimes the PvP items end up being better for PvE than anything else
available to you. Ie: the [Vindicator's Dragonhide Bracers] is the best PvE cat DPS bracer until Black Temple, even though the +17 resilience means nothing to a cat. And resilience is useful to bears for crit immunity, moreso than other tanking classes.
Some
other caveats about item level. You can't compare items of different
rarities; an epic 120 is different from an uncommon 120. Not all gear
benefits are reflected in the item level. The Tier 4 gear is better
than the level 120 would suggest; set bonuses don't seem factored in
the item level number. Odd use effects also don't factor; it's
particularly hard to evaluate trinkets just on the basis of item level,
Finally, some items have an artificially low item level; [Earthwarden] is listed as item level 100 even though it should be more like 125.
But item level can be a quick rule of thumb for looking for new gear. For example, here's a list of mage armor obtained via PvP, sorted by item level. And here's all the Badge of Justice loot, again sorted by item level.