Speak with Qual-Kehk to activate the second quest. You cannot use any of these items: already socketed items, rune word items, items that don't allow sockets (belts, rings, gloves, amulets).Magic items will receive 1 or 2 sockets, Uniques, Set, Crafted, and Rare items will get 1 socket added.
He will add the maximum number of sockets possible to the item you give him. Like the Charsi's Hammer quest in Act I, you can wait and socket your item later in the game, if you desire.
Return to town, and Larzuk will socket an item for you. He will be found towards the end of the Bloody Foothills, surrounded by minions. To activate this quest, talk to Larzuk the Blacksmith, and he will tell you that you have to prove yourself by killing Shenk.