Y'know how each ninja tool that you get has additional stats (up to 6 different ones)?
Well, reforging allows you to mix and match these stats. Essentially, you can move a stat from one ninja tool to another.
To do this, you choose two ninja tools, one to gain the upgrade and one to be consumed. The interface only allows for you to change 1 stat at a time. Once you've decided on your stat, you can sacrifice up to 6 different ninja tools to increase the probability of success. The higher the rank of the tools used, the higher the rate of success.
It's something that isn't super relevant right now. For the most part, it's something you do once you've gotten all your tools to lvl 18 and they all have 6 additional stats. It doesn't give you a lot of power.