Specialization refers to a player's decision to invest experience in only a few specific skills to make them powerful and reliable, rather than attempting to learn many different skills at once. Specializing is generally regarded as essential -- there is not enough experience in a normal game to advance more than a handful of skills to a high level. However, each level of a skill becomes more expensive
More skill means that skill is more powerful. Weapons will hit harder, attack faster, and are more reliable. Spells are stronger, cast more reliably, and higher level. Defensive skills will give more defense.
Specializing is easy. Press the m key to access your Skills screen and see all the skills you currently know. These will be separated by spaces into four or five categories (Offensive, Ranged, Defensive, Magic, and Other). Pressing the key associated with a skill will toggle its training Off (dark grey), On (light gray), or Focus it (white) causing more experience to be allotted.
By default it will use Automatic Mode, which automatically adjusts experience division between skills based on use. You can also press / and swap to Manual Mode, for more control. In Manual Mode, experience is divided flatly between enabled skills, with Focus doubling a skill's percentage.
Having one reliable way to kill something is better than having 3 unreliable ways of killing something. For example, a human could have 10 levels in Polearms, or they could have 6 levels in Polearms, Conjurations, and Ranged Weapons. While the latter option seems better on paper, each method of killing won't be as good. If your sling (ranged weapon) barely does damage, then your Ranged Weapons skill would be wasted experience. If your sling could be doing all the damage, then your Polearms and Conjurations skills would be wasted experience.
Perhaps more importantly, different offenses prefer different types of gear. A Polearms character often prefers heavy body armour, which would make Conjurations and Ranged Weapons difficult to use. A Conjurations mage would prefer light armour, which would make melee a more risky proposition. Overall: a character with 6 levels in (Polearms / Fighting / Armour) in chain mail will outperform a character with 6 levels in (Polearms / Conjurations / Ranged Weapons) in chain mail.
This isn't to say hybrid characters are always bad - just that they need assessment. You'll want at least one way of killing monsters, before investing in another way. The key is to avoid wasted experience, to invest your skills in a productive manner. Having 2 types of magic can be viable, but if you aren't casting any spells from the second school, you aren't getting anything from it (right now).
As you have full control over your skilling, it's best to specialize selectively. What does this mean for your character?
- For melee and ranged characters, it means focusing most, if not all, of your experience on one weapon at first. Unless you find an absolutely amazing weapon, once you specialize, you shouldn't switch weapon class. Afterwards, you can start investing in defensive and ranged skills.
- For casters, it means getting your main killing spells reliably castable (<= 10% failure) as soon as possible. Whenever it be Stone Arrow or Ensorcelled Hibernation, you will want to kill before you get close to being killed. Additional levels might be required to make the spell actually good at that task. Then, for as long as you're able, you should stick with those schools. Focusing on Conjurations in particular allows for a lot more flexibility.
- Some characters, especially those not worshipping a magic gifting god, might not find an lategame worthy spell of their school. Make sure that your currently useful spells are reliable, then dedicate everything else, somewhere else. Wait until after the Orcish Mines before doing this -- a book shop might just provide you wiht a spell. Alternatively, you can bide your time by investing in defense skills that will always be useful, swapping to melee if you don't find a great spell.
- Poison Magic is a big exception. The school might be good at the beginning, but does not scale well into the late game. Therefore, a caster may decide to invest a few, about 10 at most, points into the school to cast Olgreb's Toxic Radiance easily. Venom Mages and plain old Conjurers alike should get their killing schools up, then decide to switch into or out of Poison.