Blizzard has been developing an interesting new feature to keep Legion's launch content somewhat relevant for the duration of the expansion (an expansion that they now plan to keep going for longer, with more patches - hopefully meaning we'll continue to get some content for the full two years an expansion typically lasts, or even longer.)
Essentially, any level-cap activity that rewards gear - raids, dungeons, world quests, PvP - will have an potentially unlimited possibility to upgrade. Consider today how the Baleful gear, as of some minor patch after 6.2, that comes out of Tanaan Jungle now has a chance to upgrade from 655 to any multiple of 5 up to 695. In Legion, all top-level gear will be able to randomly upgrade multiple times, hitting a single global item level cap.
Each time a piece of gear drops, the game will roll to determine whether it upgrades. It repeats this roll until the roll fails or the item level of the gear hits the cap.
So, using totally made-up numbers, let's say there's a 50% chance to upgrade a piece by 5 item levels. Let's also say that Heroic dungeons drop 800 gear, Mythic Raids drop 850 gear, and the current cap is 865.
For a Mythic raider, when a piece of gear drops for her, it has a 50% chance not to upgrade at all and be 850. But if the coin flip favors her, it upgrades to 855. Then, the game flips the coin again. If she wins again, it goes to 860. And if she's really lucky, it upgrades again, becoming 865. At this point, the game stops checking to see if she gets another upgrade, because she's hit the global item level cap. Because only three coin-flips/dice-rolls get her to the cap, that gives her a 50%x50%x50% chance to get the maximum item level on the piece, so about 12.5% of a chance (again, these numbers are made up.
If someone's just running Heroic dungeons, he's far less likely to see gear at that level, but it is still a possibility. A typical piece would be merely level 800, and while getting upgraded to 805, 810, or 815 wouldn't be terribly rare, the chance that he's going to get a piece that's upgraded all the way to 865, while possible, is highly unlikely, as it would be 50% to the 13th power, or about .01% of a chance to hit that maximum item level (and that's with a generous 50% chance to upgrade, which is probably more than it will be.)
I actually think this is a pretty elegant feature. It incentivizes people to run content with lesser-geared friends because, while it's a low chance, they still might get an upgrade. But it also doesn't make the level of content you're running totally irrelevant. A Mythic Raider who has a raid on farm is probably going to put together a nice set of gear that's an average of one or two upgrades over the baseline for the raid. People working in lower-level content are going to get the occasional piece rivaling what the Mythic Raider has in the same slot, but they'd have to be absurdly lucky to have a better set of gear than one a dedicated Mythic Raider has.
Combine this as well with the Mythic Plus system, which will allow players to push dungeons to higher and higher difficulties and thus increase the baseline item quality of its rewards (presumably up to a global cap,) and you've got a lot of ways to keep content relevant.
Another fun fact - the terms Warforged and Titanforged will now be used to denote certain upgrade levels. I believe that one or two upgrades will count as Warforged while three or more will count as Titanforged. The names don't carry any separate mechanical meaning, but it'll be a quick guide to just how good that drop you got is.