Dismantling is the process of breaking down items into other materials.
DISMANTLING CAN NOT BE UNDONE.
Dismantling was added in level 65 patch TERA: Fate of Arun. It was used to break down armor, weapons, and various relic shards into feedstock, which is needed to enchant gear. The tier of feedstock received is equal to that of the item that was dismantled. The amount of feedstock derived is based on the rarity and enchantment level of the dismantled item.
As of later changes new style level 65 gear cannot be dismantled. Although enchanting materials for this gear can be dismantled, which produces Metamorphic Emblems or Supreme Metal, depending on material. Also fish can be "dismantled" for Fish Filets.
Dismantling is significantly expanded later. Many more items can now be dismantled. Possible result materials are listed in item description.
To dismantle an item, open the character's inventory window, and selecting the lowest center icon (above the space for the amount of currency), then selecting the item that is able to be dismantled. A confirmation box will come up and list the cost of the dismantling. Once you accept action, the item will be removed from your inventory and replaced with the appropriate materials.
New buttons were added with Patch 102 and now looks like the picture on the right.
Prior to the TERA: Fate of Arun, extraction was the way that items were broken down into their component parts. There were four extraction skills: Alchemy, Cloth, Leather, and Metal. Scrolls, with the required level and variety, were required to advance a character's extraction skills. The items were broken down into crafting materials instead of feedstock.