Items in this game are pretty much the same as in all previous Final Fantasy games, but in case you're new to the series, here are some basic things to know.

Potion - heals health
Ether - restores magic power
Eyedrops - cures blindness
Phoenix Down - brings someone back from KO / Knocked Out status
Antidote - cures poison
Alarm clock - wakes up a sleeping person
Handkerchief - removes oil (oil makes flame really bad)

Final Fantasy XII Walkthrough