When a party kills a creature, it often drops loot in the form of items or gold. Items are assigned to a single member of the party (which could be a henchman or a hero, in which case the item never manifests in the world), but gold is shared equally between all party members.
Normal foes can generally only drop a single item, while bosses can generally drop up to three items. Note that quest items and festival item drops are independent of normal drops.
Ownership of an unclaimed drop expires after 10 minutes
Loot can also be obtained from chests.