Honestly I'm not super knowledgeable about them but I'll give it a shot. I haven't really used any because the only ones I found early on weren't better than my crafted stuff because I blasted through low rank pretty quickly.

• You can find them in expeditions and guild quests. Higher level gives chances at better tiers of equipment, to get the best you need to level up guild quests.
• Before you go on an expedition, it lists an "equipment bias". Guild quests also have a fixed bias. This is the type of equipment you are likely to get, if you find any.
• They're mined or gathered from special points. They're found very often in blue mining nodes (as well as the abrasives needed to clean them), but I think there's a chance to get them from any node. If your quest or expedition lists a treasure room being present, that means there'll be one particular room on the map that is just full of nodes and gathering points where you're likely to find a whole bunch of equipment as well as rare things like the various cathangea items you give to the wycoon.
• Their damage, sharpness, and skills (they have special skill gems in them that you can't get otherwise, and can't remove, I believe) are random. Not totally random, higher tiers of equipment will be stronger in general of course.
• You CAN upgrade them, but it works differently from regular weapons. You can only upgrade them a few times, at the NPC in harth that un-rusts them for you. It will upgrade raw damage, probably elemental/status, and defense, but sharpness on weapons will NOT increase from the base.
• Weapons very early on can outdamage the low level crafted weapons but sharpness falls off super fast so they're really only potentially OP at the very beginning. I found the armor to be completely useless but it may be useful for very low level players that need the higher defense instead of armor skills?

Basically I haven't really gotten any use out of them yet. I think I found maybe one SnS that might be useful with a nice amount of elemental and decent raw and sharpness, in a g-rank expedition. I just hit g-rank recently so I haven't done all that many, I may find more useful ones now or as I level up guild quests.