We may all be surfing the WoW boards while at work today (even if we're aren't at work!) but I saw this post and thought it was interesting enough to warrant posting here.
There is some confusion about how these effects work and how effective they are, so I wanted to explain what they do.
When an item has the effect "Increases damage and healing done by magical spells and effects by up to 20", the damage dealt or hit points healed by one of your spells will be increased by a fixed amount up to 20. The actual amount that the spell is increased by is not determined randomly, but by which spell you are casting. You are not recieving a random bonus value between 1 and 20 whenever you cast a spell. Some random items, such as those with the property "of Shadow Wrath", indicate that they provide "+X Shadow
Spell Damage". The actual amount of the bonus is again determined by the spell being cast. There are a few items that do provide a random bonus, such as Dreamweave Gloves, but their effect notes the randomness by stating that item's bonus as "up to 1 to 19." Once again, the bonus received could be reduced depending on the spell being cast.
Spells with longer casting times such as Fireball and Greater Heal will receive the full bonus listed every time they cast the spell. Spells with instant or short cast times receive a fraction of the bonus listed. As an example of such a spell, Flash Heal (Rank 7) only receives approximately 43% of the item bonus. Talents or other effects that might change the casting time of the spell will not change the bonus; the amount received is a property of the spell being cast.
Most long duration Damage and Heal over time spells have the bonus divided amongst every tick. So Renew, which lasts 15 seconds and heals an amount every 3 seconds, has 20% of the bonus applied each tick. In a similar fashion, channeled spells also have the item bonus divided amongst every tick of the spell's duration.
Lower level spells receive a greatly reduced benefit from these effects.
These effects all stack. So if a Mage is wearing 3 items that provide up to +20 Fire damage, you will have a combined +60 to Fire damage. This means every high level Fireball cast will inflict an extra 60 damage to the target.
These bonuses are also added to the effect of the spell before the 50% bonus from a critical spell hit is applied.
Note that there is currently a bug in the game that affects heals over time such as Renew and Rejuvenation. The +healing items worn by the caster are only providing the appropriate healing bonus if the caster is also the target of the spell. Direct heals such as Greater Heal work fine, and the +Healing bonuses are being appropriately applied. Damage over time spells are also working properly. We're working to fix this bug, but currently I can not provide any kind of ETA on the fix.
EDIT - The thread is here.