Magic find

Magic Find is the common term for items that possess the "% Better Chance Of Getting Magic Items" (Diablo II) or "% Better Chance of Finding Magical Items" (Diablo III). It is a magical effect that increases the likelihood that a Magic, Rare, Set, Unique, or Legendary Items will drop. Before high magic find penalties, it will scale up the chance for an enemy to drop a magical item linearly based on their drop rate. Magic Find is added across all items for your character.

Diablo II
Note that this is based upon the monsters' chance to drop an item. If you find an item that gives 20% Better Chance of Getting a Magic Item, and a Monster has a 2% chance to drop a Magic Item, you will now have 2.4% chance of getting that Magic Item. So having 100% Magic Find does not guarantee a Unique/Rare/Set drops.

Magic Find can provide a significant increase in the number of Unique, Rare, and Set Items you find. Players that wish to find "good" Rare Items, and more Set and Unique Items will want to invest heavy in this magical bonus. Just remember, you can never have enough % Magic Find. Increasing your Magic Find Percentage will always help you.

Additional Information

 * "% Better Chance of Getting Magic Item" does not increase the Chances of getting an Exceptional or Elite Item, but if you do get an Exceptional/Elite, the chance of that being Magical/Rare will increase.
 * There is no cap on Magic Find. This means that the more you can get, the better is gets. As listed below, the maximum amount a character can obtain is around 1167%.
 * Magic Find works on Barrels, Chests, or other Containers that drop items.
 * Magic Find works on Act Bosses.
 * Magic Find also increases the chance of finding Magic Items with the Barbarian's Find Item Skill.
 * Magic Find also works in conjunction with Hirelings. When you make a kill, you get the Magic Find % of yourself only. When a Hireling gets a kill, it uses the combined Magic Find of the Hireling and you.
 * When in a party, the chance to get a Magic Item will be determined on the player who makes the killing blow. For the best results, have the player in the party with the best Chance of Getting a Magic Item finish off all the monsters.
 * Magic Find does not influence the drop rate or item level of Runes you come across.
 * Magic Find does not increase the chance of obtaining better magic items through Gambling.
 * While there is no cap on Magic Find, there is a diminishing return formula (that is not available) which becomes active over 10% Magic Find for Rare, Set, and Unique Items (but not regular Magic Items). This does not mean that it's useless to get over 10%, but it does mean that the benefits drop off as you get higher Magic Find. The most Magic Find is still better than less Magic Find.

Maximizing Magic Find
A common comment is that with a lot of Magic Find, you won't be able to kill anything. Some classes such as spell casters (Sorceress, Necromancer, Elemental Druid) are more capable of sacrificing all equipment for Magic Find. You may wish to create "Magic Find Characters" to "farm" or find items then use those items on other characters. Still, melee classes (the Barbarian in particular due to the Find Item skill) can be very successful at treasure hunting.

Here's how to get the most (1167%) out of Magic Find for yourself. This does not count the maximum possible with Hirelings, but you only receive that bonus when Hirelings make a kill. Add Magic Find to Hirelings to increase Magic Find even more. Some items are pretty rare making it difficult, but not impossible (especially with time and trading), to obtain the most Magic Find. Alternative "poor man" items are suggested.

Ist Runes are generally socketed for maximum potential with +25% each, or +30% in weapons. Since acquiring many Ist Runes can be very difficult, perfect Topaz gems can be substituted in helms or body armor with a minor loss at +24% each. Although much more rare than topazes and not as powerful, Jewels with the  (+3-7%) and  Prosperity (+5-10%) may also be used; with both affixes, an Emerald Jewel of Prosperity could be worth a maximum of +17%. You can add sockets via a quest or Horadric Cube recipe.

Diablo III

 * (Before Patch 1.0.4) Magic Find works different when in a party. The chance to get a magic item is averaged among all party members. So if there are 2 people in a party and one member has 100% magic find and the other has 0% you have an average of 50% to find a magic item. This makes it best if all party members have around the same magic find to avoid reducing the percentage of magic items found.
 * Before patch 2.0, each Paragon level used to increase Magic Find by 3% (up to the hard cap of 300% total).
 * Magic Find % has a hard cap of +300% from equipment bonuses.
 * Joining to a group multiplicatively boosts the Magic Find of all members by +10% of existing amount (minimum 10%) per player beyond the first.
 * 20% (one fifth) of the Magic Find from follower's items is applied to player.
 * As of patch 2.0, Magic Find can no longer roll on an item as a random affix. The only ways to increase this stat are pre-patch items, Fortune Shrine (+25%) or some legendary items that have a guaranteed bonus (for example, or Leah's Ring).
 * Also as of patch 2.0, Magic Find is penalized in effectiveness to 30% for Rare items and 10% for Legendary/Set items. This does not mean that you can only have +30% / +10%, but that having +50% Magic Find will only add +15% to Rare find (50% x 0.3) and +5% Legendary find (50% x 0.1). With the 300% cap, it means no more than 90% Rare find and 30% Legendary find, so sacrificing the combat stats for MF is generally not worth it.
 * A change to counter the above exists for Legendary/Set Items. Starting in Torment I, heroes gain approximately 1.15^N (N being the number of Torment) multiplier to finding Legendary items. This stacks with Magic Find multiplicatively. While in a Nephalem Rift, the chance is further doubled (also multiplicatively).
 * As of Patch 2.4.2, socketing a Topaz into a Helm no longer awards Magic Find.