Can anyone explain how to barter with other people in the dungeon? I read what the manual says but am still unclear about how to go about the bartering process. Along with that, I read that I can get things repaired in a similar fashion. Can anyone explain that as well? I have some items that are in disrepair, and some things that I don't think I will need.

Which game? (I don't remember encountering this sort of thing in any of the Ultima's I've played, and I've played 1 and 3-7.)

Sorry I didn't include the game title in my first post, I forgot this forum is more than just what I am playing. I am playing Ultima Underworld 1.

You can only barter with someone if they have a dialogue option to allow it. Most NPCs in the civilized areas will, as will some nonhostile NPCs outside of the civilized areas.

Once you've chosen that dialogue option the barter panel opens up at the top of the screen between your two portraits. You can see what they're offering and add items of your own to your side of the panel. Whether an item is actually part of an offer depends on whether it's highlighted. Clicking an item in one of the bubbles will light or disable the pip that shows that it's part of the current deal offer.

You'll only get a successful deal if what you're offering is as or more valuable than what the other person is offering, though the value of the trade is modified by your Barter skill. Appraise will allow you to assess the quality of the deal ("I need a moment to consider this deal...", or some similar dialogue option), though if you don't have a reasonable number of ranks in it then your assessment is liable to be way off the mark.

If you choose the dialogue option to make the offer and it's accepted, the trade will happen. If it isn't (because you weren't offering enough), the NPC will say that they don't like the deal and their willingness to barter will decrease a bit - or a lot if you offered them something insultingly bad.

Repairs can be done by a specific NPC on the second level. You pay him directly in coins. You can also perform your own repairs if you have the Repair skill, although it's advisable to save first since you can easily do damage to an item or even destroy it if your skill is too low.

I am in the middle of the first dungeon level, have talked to three NPCs - Gulik, Hagbard, and Bragit - but never saw any dialogue option for bartering. Will the option appear automatically?

If an NPC is willing to barter then it should appear at some point, although not necessarily among the first available options. The phrasing can vary quite a bit, but it should be something to the effect of trading/bartering.

They don't barter. You can for instance barter with grey and green goblins on the first level. Just talk the generic ones, that don't have a special name. You can't really miss the dialogue with them. But be warned, most NPCs don't have anything worthwile bartering for (you do get a magical ring from one NPC, though). That gets changed in UW2.

Get a fishing rod pronto. Fish make for a decent item to barter, if you want something from an NPC. You can fish from most bodies of water in the game that are larger than a puddle. Put down most of your stuff if you need to free up carrying capacity to hold a larger stack of fish.