Italy had a very simple mindset- the Mediterranean Sea was their private pond, everyone else wasn't welcome. Because of their country's geography, they felt that aircraft carriers were unnecessary- how often would they be operating out of reach of land-based aircraft, really?- and as such they focused on light cruisers and destroyers. Their older battleships received major upgrades to their weaponry (slight boring-out for larger shells, but an enormous increase in angle, allowing for greater plunging fire). Outside of the old battleships, almost all Italian vessels were built for speed above almost all other considerations- after all, while they were always going to be under air cover, they had a lot of coast to cover. As such, their cruisers tended to have destroyer speeds, their destroyers were among the fastest in the world, and their newer heavy cruiser and battleship types (like Littorio) were quick as well compared to contemporaries.
Leadership, however, was lacking- they regularly shied away from major actions out of fear of losing heavy ships. When they did try to engage, their crews were as brave as any, but flag decisions often were questionable (a good example being Matapan). Radar was essentially nonexistent for all intents and purposes for much of the war (again, see Matapan for an example of how THAT decision went).
On the whole, ships were lightly armored compared to contemporaries, lightly armed as well, but absurdly quick.