There are two kinds of games that go on realm games: Ladder, and Nonladder.
Nonladder is for all the ancient characters that have already played through a ladder season, have been around from before ladder times, or were created specifically for nonladder games.
Ladder characters are characters that play on the current ladder season. Ladder characters cannot interact with nonladder characters
Every 6 months to a little over a year, the ladder season gets restarted, and all previous ladder characters, get moved to nonladder. This is done to force everyone to have a fresh start and play the game without all the best of the best gear and without the readily available help from high level characters. Ladder characters have access to more runewords and more uniques.
I'm going to assume you know what runewords are, but just in case you don't, read up on them from the arreat summit:
http://classic.battle.net/diablo2exp/items/runewords.shtml
hope that helps
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