An item can be combined twice, and each combination only adds one ★, for a max for 7★ (aka 5★++).
Combined items only get a minor stat boost, which is why most people refer to them with ++.
For example, a 3★ item combined twice will show as a 5★ in the game (it will have ++ in the item name so you know it's been combined), but a native 5★ will be EXTREMELY more powerful.
However, synergy is based on the ★ level of an item, each ★ level gives the item an extra bump if it's used in the proper realm. At this point, a 3★++ item with synergy will probably be more powerful than a native 5★ item without synergy.