The Talisman was part of the inventory interface in the Blizzcon build (October 2008). It was seen between the two weapon slots in the inventory, and when clicked a bronze, circular disk appeared over the character. There were 9 slots on the talisman, with lines connecting some of them. It had no function in the Blizzcon build, and could not be clicked or activated in any way.
In interviews at the show[1], Jay Wilson disclosed that it was something they were playing around with during development. It's called the "Talisman" and it's an "attribute modifier that used gems," according to Jay. There were no gems to be found in the Blizzcon demo, so no players could attempt to experiment with the Talisman, if it had even been enabled in that build.
Jay said they'd rejected the Talisman the way it had been working, and that it was now non-functional, but that they would probably do something else with it.
Features like this are good to keep in mind when pondering the game balance and design of Diablo III. New interfaces and features can (and will) be added, such as skill runes, that radically change the balance of the game, the utility of items, and more. People not on the D3 Team can never know just how much importance to place on various issues, since what we see from the outside is not necessarily what's going on inside.