The Horadric Cube is a quest item obtained in Act II which can be used to complete several quests. In addition to that task, it can be also used as a permanent backpack to store additional items and create new ones.

Place items into the Horadric Cube by picking them up, dragging them over the Horadric Cube, and left click on the Horadric Cube. You will hear a sound when the item is placed into the Cube. You can also pick the Horadric Cube, drag it over a large item you want to pick up, and left click on that item to place it into the Cube. You can also open up the Cube by right clicking on it like a Tome. Drag items from your inventory into the Cube.

Items will be Identified by Cain while inside the Horadric Cube.

Transmuting Items
You can use the Horadric Cube's magical powers to Transmute items into a new item. Place the items into the Cube and hit the Transmute Button.