From what I can gather each item is a ticket that passes through a series of rif/sif checks before it becomes an item. Basically its like this:
Kill a mob and generate a ticket. First check: Is the item normal or special?
Check: If fail, drop as white equivalent; if pass, continue.
Check: If fail, drop as green equivalent; if pass, continue.
Check: If fail, drop as blue equivalent; if pass, continue.
Check: If fail, drop as purple equivalent; if pass, continue.
Check: If fail, drop as cosmic equivalent; if pass, continue.
Check: Is the unique for active hero, other hero, or is it an any-hero.
Im not certain if the details are entirely correct, but that's more or less whats going on. Obviously the higher your item find, the better your chances are on each check.