To enchant your pebbles you need use pebble enchanter which is located in the northwest of Konoha Gakure.
Cost of enchant:
1 uncommon pebble = 100 pebbles + 3000 coins
1 rare pebble = 10 uncommon pebbles + 10000 coins
1 exceptional pebble = 10 rare pebbles + 30000 coins
To improve your items you need to find Item Improver NPC which is located above pebble enchanters.
Then you have to say him name of item you want to improve. If you'll have enough resources improve will succesfull.
Improved items give higher stats. Green/blue/red stats in Items