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This article was originally published as a preview to the WoW 3.1 patch. It has been updated to be accurate as of patch 3.2.2.
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An Explanation of Badge Gear
The new approach to badges (emblems) in Wrath of the Lich King is something new to us all. As more content is continually released, the gear you can purchase with emblems is upgraded, and in some cases the badges that drop in normal content, like heroic dungeons, is changed so as to grant access to this new gear.
What are we talking about by "badge" gear? In The Burning Crusade an item called a "Badge of Justice" was added to heroic boss loot tables. These badges acted as currency which could be used to purchase other items. Eventually, Badges were added to all raid boss loot tables and better and better items were made available to purchase using Badges. The problem was that a person farming Tier 4 content, like Karazhan, could get enough badges to buy Tier 5.5 equivalent gear with little effort.
In Wrath of the Lich King, the function of "badges" was changed. Now they're called Emblems of XYZ, though the "badge" term still sticks. As of patch 3.0, Emblems of Heroism dropped off of all Heroic dungeon bosses as well as 10-Man raid bosses. These were used to purchase comparable level gear (iLvl 200) to what is found in those instances.
There was also a higher level badge, the Emblem of Valor. Emblems of Valor dropped in 25-Man raids, and are similarly used to purchase comparable level (iLvl 213) gear.
When patch 3.2 released, all emblems were changed over to the Emblems of Conquest - this means that a person could simply do heroic dungeons and use the emblems to purchase iLvl226 items. A new emblem was introduced, the Emblem of Triumph, which only drops in the highest end content and can be used to purchase iLvl232-245 items.
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Badges in Ulduar
With the introduction of a newer, harder raid instance, Ulduar, in patch 3.1, a new rank of Badge was added. These, as discussed above, are called Emblems of Conquest, and as of patch 3.1 only dropped in the 25-man mode of Ulduar. Now, they are the lowest form of emblem available.
As always, higher emblems can be traded in for lower ones. The vendors for Heroism and Valor gear as still there, offering the same things, but most people will find that few of their offerings are worthwhile.
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Emblem of Conquest Gear - Belts
Prior to the 3.1 WoW patch release all we knew about the items available for Emblems of Conquest was the classes and specs they were designed for. Now (circa 3.2.2) they all have names, but their purpose is still clear.
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Emblem of Conquest Gear - Pants
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Emblem of Conquest Gear - Hands
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Additional 3.2 Update
When patch 3.2 came, Runed Orbs (previously only available as drops in 25-man Ulduar) became available for purchase for 18 Emblems of Conquest each. These are used in sets of 6 to craft iLvl226 boots and belts.