Flying Carpet
This is a special feature of the 1001 nights patch.  Players must go to Baghdad, Carpet Shop (68,159) to buy carpets.  The shop is next to the hospital, which is on the right side of Baghdad.  The shop attendant, Elzin will explain how to use and equip the carpets.  The shopkeeper, Kazan sells carpets.
Carpet Name Stat Picture
Apprentice Carpet – 5,000 coins
(For pet Level 1)
Volks Carpet – 7,990 coins
(For pet level 10 & above: )
Advanced Carpet – 12,400 coins
(For pet level 15 & above: )
Dex +4
Used Carpet – 9,990 coins
(Random) (Possible to find rare carpets this way but way unlikely.)
Cool Carpet Dex+30
Smart Carpet Dex+40
Spiffy Carpet Dex+50
Dream carpet Dex+60

Carpet Usage

On the whole, carpets are the same as carts, pets must be in combat mode to use them.  NOTE: If the pet dies in combat, with the carpet equipped, the carpet will disappear!  Once you have a flying carpet, not only will your journey be more convenient, you can reach places where walking can’t.

Carpets DO NOT regenerate mana or decrease encounter rate.

Thanks to Mefisher & Moiraine