Rarity

Tier 0 (White)
All basic items fall under this category. These are mostly building materials. Items that are white are not necessarily worthless, and could be a good source of income early on, as with turning glass into Bottles you can make a hefty profit and make good use of tier 0 items.

Tier 1 (Light Purple)
Weapons and Armor made of Demonite or better are tier one. Certain accessories such as Lucky Horseshoes are also tier one. Certain uncraftable weapons are tier 1 such as the Ball O' Hurt.

Tier 2 (Light Green)
Tier 2 items are largely uncraftable, with the exception of Necro Armor and the Star Cannon. Muramasa, Vilethorn, as well as other spells like Water Bolt are tier 2.

Tier 3 (Light Orange)
Weapons and armor made of Hellstone are tier 3. Certain uncraftable weapons are tier 3, such as the Staff of Regrowth. These items are generally rare and high end items, except for the Staff of Regrowth, which generally is only used for cosmetic purposes. Rocket Boots as well as Feral Claws and Flower of Fire are tier 3. These items are rare and usually found later in the game.