lol, it's sorta explained... once you get in the mages guild and get into the Arcane Uni you can enchant weapons and make spells. So take a normal weapon and use a gem to add an enchantment to it, the better the gem the more powerful the effect. So like frost or fire damage on a sword, water walking on your armour etc etc... unfortunately you can only put one enchantment on an item though. When you close an Oblivion gate you get Sigil stones to enchant weapons and armour too, these are miles better. I managed to collect 16 of them.
Oh, to catch souls the Umbra sword has Soul Trap, you can get scrolls or spells to do it for you as well.