Blue items in Risk of Rain 2 are Lunar items - identified by their blue icon border. There are 20 lunar items in total: 16 passive items and 4 lunar equipment. Every lunar item has a powerful upside paired with a significant downside. They cannot drop from chests - only from 
Lunar Pods (1 Lunar Coin) or the Bazaar Between Time (2 Lunar Coins each).
Rare spawns on any stage. Cost 1 Lunar Coin each. Drop a random lunar item.
5 rotating lunar items for 2 coins each. Access via Blue Portal after a teleporter event. Can reroll shop for 1 coin.
Sacrifice a lunar item for a Pearl (80%) or Irradiant Pearl (20%). Spawn on Wetland Aspect, Scorched Acres, Siren's Call.
Each Heresy item replaces one survivor skill with a Heretic ability. Collect all four to fully become the Heretic.
60s CD. Grants massive all-stat buff for 20s. On expiry inflicts Tonic Affliction (-5% all stats per stack, stacks each use).
45s CD. Burns everything within 15m for 12s. 24x damage to enemies, 1x to self, 0.25x to allies.
No CD. Places an AoE zone slowing all characters 50% and reducing armor by 20. Up to 5 active.
140s CD. Rains meteors globally for 20s dealing 600% damage per hit.
Blue items in Risk of Rain 2 are Lunar items - the rarity tier with a blue border on their icons. There are 20 lunar items in total: 16 passive items and 4 lunar equipment. They are characterized by powerful effects paired with significant drawbacks. They cannot be obtained from chests - only from Lunar Pods (costs 1 Lunar Coin) or the Bazaar Between Time (costs 2 Lunar Coins).
Lunar items come from two sources: Lunar Pods scattered rarely across stages (1 Lunar Coin each) and the Bazaar Between Time shop (2 Lunar Coins each, 5 rotating options). Lunar Coins are a persistent account-wide currency dropped rarely by enemies. You can also use the Artifact of Command to select lunar items from Command Essences.
Yes - take them to a Cleansing Pool. Cleansing Pools exchange a random lunar item from your inventory for a Pearl (80% chance) or Irradiant Pearl (20% chance). You cannot choose which lunar item is taken. Carry only the item you want to sacrifice before activating. Cleansing Pools spawn on Wetland Aspect, Scorched Acres, Siren's Call, Verdant Falls, and Aphelian Sanctuary.
Shaped Glass and Transcendence are generally considered the strongest. Shaped Glass doubles your damage exponentially per stack and is transformative for damage builds. Transcendence converts all HP to shields giving a large effective health buffer on mobile survivors. Spinel Tonic (lunar equipment) is also S-tier with the right equipment cooldown setup.
The four Heresy items (Visions, Hooks, Strides, Essence of Heresy) each replace one of your survivor's skills with a Heretic skill. Collecting all four transforms you into the Heretic survivor for the rest of the run. Each can also be used individually to replace just one skill. They are lunar items obtained from Lunar Pods or the Bazaar.
Corpsebloom is widely considered the worst. It adds 50% healing but converts all healing to a timed HoT capped at 10% max HP per second (halved per stack). With multiple stacks, healing becomes so slow it is effectively worthless. Egocentrism is similarly punishing - it slowly converts your best items into copies of itself over time.