Upgrading abilities can be done by visiting the Wizard. This will bring up the Upgrade Abilities menu, where you can drag your desired ability into the upgrade slot.
Once you have the ability in the slot, you can tap upgrade and wait for the time it takes to upgrade. It costs Mana to improve the item’s Upgrade Stars.
Once you have upgraded an ability to its max "Upgrade" you will be able to upgrade the unfilled Star on the spell with dust from the Altar. Once you evolve the ability, the upgrade will decrease back to 0 and you have to go through the process all over again to further upgrade the available stars on your spell