How to edit item.dat and equipment.dat and what it is?

its your current item...

This thread describes excellently how it works and how it can be modified.

And in addition to that, Lwafflez made an updated version.

Of course, it only explains item.dat.
I don't think anyone has figured out what equipment.dat does, other than that it has something to do with ghosts.

How to edit item.dat?

Click the links in the above posts.

If you mean "what program do I use to edit it?" then just open it with Notepad, Textedit, or something like those.