Way house-ruled here. Lemme give three different examples:
1) The PCs found a cloak on an enemy's body, scarlet with spidery golden runes embroidered on it. When they put it on, it rustled in a nonexistent wind, and it sounded as if voices were whispering to them. When they detected magic on it, they discovered that it was (duh) magical, and a Spellcraft check of 23 told them that it had a wind spirit bound to it. A bit of experimentation later, and they realized that the cloak would try to intercept itself between the wearer and an attack. At that point, they decided to give it to a low-AC sorcerer, and I told her that it was a cloak of protection +1, granting a +1 deflection bonus to AC.
2) On the same body, the PCs found a necklace with what looked like a dreamcatcher pendant. The center of the dreamcatcher weaving was hollow (think a 2-d donut woven by a spider), with the inner ring surrounded by what looked like ruby beads. It detected as magical, with some sort of scholarly spirit attached to it. The sorcerer decided to wear it. Whenever she cast a spell, the rubies would glow for a few seconds and then dim.
The PCs didn't have access to Identify, but they were traveling to meet some wizards from the same country as the fallen enemy. When they met the wizards a few days later, one of them recognized the type of magic, and suggested that the sorcerer try to draw the magic of a spell back into her after she'd cast it. She did so, and at that point, I told her how it would work: after casting a spell between 0th and 3rd level, she could take a standard action to regain that spell (or spell slot, in her case). She'd have five rounds to do so before the spell or spell slot was lost.
3) Long ago, the PCs found a magical spyglass. They figured out its first power fairly quickly: it is a normal spyglass, except with amazing range. Even subjecting it to an identify spell didn't tell them more properties of it. Several sessions after discovering it, someone was scrying on them, and the spyglass started to twist in their backpack. They learned a secondary power of the glass: its permutations allow a +5 bonus to scry checks to realize you're being watched, and if you beat the other person by +10 in an opposed scry check, you can get a look at them.
Much later, purely through chance, they realized a third property of the item: if you're watching someone with the spyglass, as long as you don't take your eye away from the lens, you can watch them turn corners, enter a forest, climb up on a roof, etc. Line of sight doesn't matter.
I've told them that they may make additional scry checks at later levels to discover additional powers that the spyglass has.
Detect Magic in my game tells what sort of spirit is bound to an item, often giving a good clue about what sort of item it is. (It doesn't, however, tell schools of magic). Identify works almost like normal, except that it tells an item's most prominent function: it'll tell you how to activate the flaming on a sword, rather than telling you the sword is +1. And if someone gets reasonably close to understanding what an item does, I'll go ahead and give them the stats for the item, so that I don't have to keep track of it.
But mostly, I try to make discovering an item's properties an interesting, story-based proposition, rather than something left to a single spell.
Daniel