1 Tal Rune + 1 Shael Rune + 1 Perfect Diamond + Normal Unique Armor = Exceptional Version of Armor
This formula changes the base item type from the normal to exceptional version. For example Quilted Armor is turned into Ghost Armor. This does NOT convert the item to the Exceptional Unique version of the Unique Item. So you cannot for example use this formula to transform Greyform into The Spirit Shroud. Unique item bonuses remain the same; only the item it's based on is upgraded. This can be used to upgrade Ethereal Items also. They will continue to be Ethereal after they are upgraded. Also if the item is socketed, then jewels or runes and their mods will also remain. Armor refers to any sort of armor, including helms, boots, belts, gloves and shields, not just body armor.
1 Ko Rune + 1 Lem Rune + 1 Perfect Diamond + Exceptional Unique Armor = Elite Version of Armor (Ladder Only)
This formula changes the base item type from the exceptional to elite version. For example Ghost Armor is turned into a Dusk Shroud. This does NOT convert the item to the Elite Unique version of the Unique Item. Unique item bonuses remain the same; only the item it's based on is upgraded. This can be used to upgrade Ethereal Items also. They will continue to be Ethereal after they are upgraded. You cannot do this formula unless you are using a Ladder Character. Also if the item is socketed, then jewels or runes and their mods will also remain. Armor refers to any sort of armor, including helms, boots, belts, gloves and shields, not just body armor.