Gemcrafting is a process of upgrading lower tier gems into a higher tier. You need 5 gems of a chosen tier to upgrade it into 1 gem of the next tier. You can do this by using a [Gemcraft Engine] that can be found in any major city's forge (place with the Blacksmith NPC), excluding Sattnyr Island.

You can [use] the Gemcraft Engine on your stack of gems to upgrade it. Take a look at the following animation to understand how it works: