How does item repair work?

You need two thing for repairing an item:

• You need a character that has invested points of blacksmith and /or has equipped items that give a some points in that skill.
• You need a repair hammer or a tong in that same character. Both of them can be bought, looted or found somewhere often.

Then you may right click an item in the blacksmith character inventory and select "Blacksmithing" in the menu that appears to repair the item. Alternatively, if you want to repair a item in another character inventory panel, you can right click the repair hammer or tong in the blacksmith character inventory and select "Use" (double click also work). This will change the cursor to an anvil. Then click in the damaged item in another another character inventory to repair it.

There used to exist a potential downside on fixing an item: It losed maximum durability permanently unless you had 5 or more points in blacksmith, but, at the time of the current answer, it looks like that is no longer true. Also, It used to require higher ability levels depending on how much damage the item has sustained, but I cannot find any instance of that being applicable anymore at the current game version, but I'm still at low level, so If anybody can confirm or refute it, please do it in the comments so I can update the answer acordingly.

Anyway, even when that was applicable, people used brute force anyway to open chests and doors. They simply resorted to spells, summons or unbreakable weapons to do so.