Press "U" on your keyboard. It will bring up a list of all the items in your inventory that you can eat. Simply select the item and confirm to use it on yourself.
edit: Oh there is also a button that does the same thing. You know that row of 4 icons, one which puts you in battle mode, one that opens menu etc, THe bag will also open up the menu for using items.
Edited, Feb 13th 2011 8:15pm by Magnesium02