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Items within World of Warcraft that are important because of 'non-combat' uses. Gear that looks good but has bad stats, disguises, items that you use for fun, etc.
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.
On RP servers Vanity items are sometimes called Props.