Ok, so this was something that confused me too and a guy gave a real good explanation on these, but basically you want to continuously combining these. It’s better to leave them unidentified until you get to the legendary because combining 9 unidentified items gives you +1 the average of the next tier.
So basically, combine 9 no backgrounds to get a blue, or 9 blues to get a green/gold and 9 greens to get the legendary. Once they are legendary, then identify them.
9 legendaries combine into a grotesque endeavor which will have 5 or 6 of the 9 stats you combine. It allows you to really put a lot of legendaries on your belt to use.
EDIT: also you can use the transmutation panel to move / organize them into one of the 3 tabs.