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Vanity items within World of Warcraft are important because of 'non-combat' uses rather than functional uses. Gear that looks good but has bad stats, disguises, items that you use for fun, etc. Some vanity items have functionality, but it is usually not unique functionality (like mounts and pets).
Typically the term Vanity is used for Small Pets, however in this instance it is a blanket term meaning all things in game that would be desired for a reason other than its actual attributes. From an equip item that looks different or just an item with a name that means something to you, a Vanity item can be virtually anything.
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