From http://www.montecook.com/arch_dmonly3.html
What is a Caster Level?
This is the level of the creator (or the casting level of the spells placed within the item, if lower than the actual level of the creator).
From the Dungeon Master's Guide:
Caster Level: The power of the item (just as a spell's caster level measures its power). The caster level determines the item's saving throw bonus, as well as the range or other level-dependent aspects of the powers of the item (if variable). It also determines the level that must be contended with should the item come under the effect of a dispel magicor similar situation.
Note what it doesn't say. It doesn't say that you have to be the listed level to make a given item. It's not a prerequisite. You don't have to be 17th level to create a 1st-level pearl of power -- you just have to meet the prerequisites. Prerequisites, you'll notice, get their own section. It comes next. All you do with caster levels is determine the level-dependent effects of an item. Those listed in the DMG are just averages. When you determine an item randomly, or pick one out of the book for your player characters to find or to equip an NPC, that's the caster level of the item. That's all it is.
The DMG goes on:
For potions, scrolls, and wands, the creator can set the caster level of the item at any number high enough to cast the stored spell, and not higher than her own caster level. For example, at 5th level, Mialee could scribe a scroll of invisibilityat caster level 3 (making it last 30 minutes), caster level 4 (40 minutes), or caster level 5 (50 minutes). For other magic items, the caster level is determined by the item itself. In this case, the creator's caster level must be as high as the item's caster level (and prerequisites may effectively put a higher minimum on the creator's level).
Note that caster level can be a variable. The DM may decide that a particular carpet of flying was created by a high-level caster who decided to put the spells in at her own level. Such a carpet could withstand attacks and dispelling with a much greater chance. Most items conform to the caster levels listed. Of the exceptions, the differences often aren't that telling, except for occasional items (say, a staff of frost) where the differences truly matter.
How about another example. Let's say you're an 8th-level wizard, and you're going to make a wand of mage armor (good choice, by the way, and your friend the monk thinks so too). What's the caster level of the finished wand? 8th? The answer is: maybe. It's actually whatever you want it to be, from level 1 to 8. You can choose to voluntarily set the caster level lower than your own to make the wand less expensive. But the duration of the mage armor spell in the wand is based on whatever level you set it at.
That means it's possible to have a caster level of a rod lower than 9, even though you have to be 9th level to use the Craft Rod feat.
What is a Prerequisite?
Again, let's first see what the DMG says:
Prerequisites: The requirements that must be met in order for a character to create the item. These include feats, spells, and miscellaneous requirements such as level, alignment, and race or kind.
Seems simple enough, right? This is the stuff you need to have to make the item.
And let me point out again, level isn't in here (actually, on rare occasions, level is listed, such as with a potion of heroism, but if that's the case, look for it under prerequisites, not caster level).
