Jewellery adds a lot of flexibility to your party. Different jewellry can give different bonuses / abilities that can enhance characters in an area where they are weak.
You can unlock them in advancements tree

Essence types that you use when crafting a jewellery defines types of items you can get.
In examples below I will show "best items you can get with T2 resources".

Probably most common thing you can craft.
It doesn't require any specific essence, which means you can use any unlocked materials that fit corresponding slots.
Also it is a very valuable item that will help you in every challenge as it gives you shielding to all.

Increases Personal Carry Limit
A must have for flying demons or low-strength mages if you want to put some decent armor on them.
Best materials for this one are gems - they weigth less.
If you use just Ruby - you can get +113 to carry limit. Enough for good Medium armor.

You need to have Leather essence from materials to craft this.

Quite powerful Lullabye. Requires Leather Essence.

Requires Metal Essence.
A good hint from Ambrant Arandel:
This jewel has a very specific niche. When using beasts, it provides an alternative damage allocation. Most beast attacks are single hit, without the sweep attack provided by sword weapons. The wolf does get a 'line charge' skill that allows for linear damage allocation, but this as well as the 'brute force' and 'bite' attacks are at the mercy of the leveling scheme for advancement. This jewelry option allows them to strike like a warrior with their above average strength and a modifier left up to your equipment availability.
Also there is a mysticism based version which makes for a pretty good combat mage.

Requres metal essence.

Needs Stone essence. If you want to micromanage your party and put this on when you return to the village for crafting - go for it.

Requires Wood essence.
This can be quite useful early in the game while your gatheres are low-level or you don't have them at all.

Requires Wood essence.

Requires Gem essence

Quite powerful intelligence-based attack for Yellow challenges.
Requires Gem essence

Requires Bone essence