The blacksmith is a general location found in many cities and villages. It always contains a forge and sells some weapons and some tools; OberinWiki does not recommend using the blacksmith for shopping but rather for blacksmithing (unless you broke a tool and need to buy another one, in which case the blacksmith might sell it).
To use the forge, stand next to it. If necessary, hold control and click the forge to make your character face it. Now, from the Skills window, click the checkbox for Blacksmithing.
Below is a list of what can be bought at the blacksmith.