In my last campaign, each PC had a magic item that leveled up with him, gaining new powers. Each item was named, had a history, a maker, and a story about how it came to be where it was. The fighter's sword was a cleric-killer. It had silence on a crit powers, did extra damage to anyone with a holy aura, etc... She used it to hunt down an evil cult; the original owner had been killing clerics who rose up against Imperial rule (in a time before the emperor became a follower of the God of the Dead himself). It was lost in the dungeon when stolen by an evil rogue who tried to use it to slay a wizard (he thought the silence power would work vs anyone, not just a cleric, due to some bad research on his part). The PCs never discovered ALL these details, but it was fun watching them learn some of it.
I didn't make all that story up at once. I knew, when they found the blade, that a rogue had brought it there after stealing it from the rightful owner. The rest came with other bits and pieces of backstory for the whole campaign region.