Near the end of Star Wars: The Old Republic's testing phase, BioWare enacted some changes to the Item Modification mechanics in the game that didn't bode well with many players.
To put things in perspective and explain the rationale behind their choices, Emmanuel Lusinchi - Associate Lead Designer on SWTOR - posted an in-depth write up on the official Star Wars: The Old Republic forums. Read a snippet below:
So, it turns out some of the patch notes regarding our modding system were probably poorly written (by me, I must add) and generated quite a lot of concern. I’ll try to explain the changes better and, while I'm at it, explain the logic for those changes.
To start with, we’ve introduced a new color and item type: the Custom items. Those are shown with an orange border and are fully moddable. This change is purely cosmetic. What we have done is take all fully moddable Prototype items (blue) and simply changed their icon color. This helps us create a better and more unique identity for fully moddable gear.
Since other games have used orange to signify truly rare and epic gear, let me clarify that orange in Star Wars: The Old Republic has nothing to do with 'epic' gear. (And for those curious, our version of 'epic' is a very deep purple, bordering on a rich blue). The orange we use is actually the old bronze color we developed a long time ago when our color coding was based on metals (bronze, silver, gold, platinum, etc).
Custom gear is actually pretty common: it can be obtained through class quests around level 8, as social gear, as space quest rewards and as light side / dark side gear. It is also the typical gear found in Flashpoints and as rewards for Heroic missions. Several pieces can be acquired using planetary commendations.
The second change introduced in the latest build is the locking down of the base mods (Armoring, Barrel, Hilt) and color crystal mod on the Artifact items (purple). To explain this change, I need to also explain the history of the the modding system...