An artifact, or artefact (see American and British English spelling differences), is a general term for an item made or given shape by humans, such as a tool or a work of art, especially an object of archaeological interest.

What is the reason for creating an artifact?

Artifacts are often needed simply to cause the right kind of thinking to happen -- and to verify that the thinking has happened.

How do you use artifacts?

In order to equip Artifacts, you need to defeat the second boss in the main story quest, "Cold as the Grave". Defeating the boss unlocks the vault, and from then on you'll be tasked to pick up the "Eridian Synchronizer". Picking it up will finally give you the ability to equip and use Artifacts.