Arcane Dust is a Magic crafting material in Diablo III, obtained by using the Blacksmith to salvage magic weapons and armor. Blue items of any level will yield 1-4 Arcane Dust.
Sometimes monsters and objects can drop Arcane Dust as well.
Arcane Dust is account bound. It is used in crafting rare, legendary, and set items, as well as enchanting and transmutations.