Steel is a pretty awesome metal. Made by placing coal ore on either side of an iron ore in a smelter, it touts both greatly increased stats and many more uses. However, a smithing level of 30 is required to make the metal into bars, and even higher levels are required for the more advanced items.
Steel has the same stats as diamond. Holy shit! However, steel tools only have 500 uses (700 for a scimitar,) so don't use them too frivolously.