See the sticky on this forum...
Salvage bags are bought from Provisioners.
you left click on one, and you get a choice of
Salvage All
Salvage Ingots
Salvage Cloth (also includes leathers)
choosing one of these options will salvage all items of the appropriate types that are in the bag that can be recycled for new material.
Note that the "reversed" leather armor that you normally cannot cut up WILL salvage in the bag (but bone armor still won't)
In addition, you will get ONE EXTRA INGOT BACK PER SMITH-TYPE METAL ITEM, over and above what one normally would get back (normal amounts are 0.66% times your mining skill, rounded down).
The whole process takes ONE SECOND (2 or 3 if Salvage all chosen, but there have been bugs with salvage all in the past so most don't use it), with all the items being recycled INSTANTLY, unlike the UO Assist Recycle agent that only salvages one item at a time (taking about 1 second per item). Between the quicker time and the bonus ingot return, it's vastly superior to the UO Assist feature that inspired it.
You still need scissors in the top level of your pack for the Salvage bag to work on cloth & leather, and some sort of Smithing tool (I prefer tongs, due to weight) in the top level of the pack to salvage ingots, and be next to a forge & anvil (a fire beetle can count as the forge, but you still need an anvil)