Italy's automotive industry and economy was stunted at the start of the war, relying on significant imports, meaning it was difficult to mechanize in the face of increasingly armoured warfare, whilst Mussolini's call for '8 Million Bayonets' put too much stress on the army's ability to supply and train its men. Most of the armour began the war obsolete with little industrial capacity to innovate, whilst most of the artillery was from WW1. The High Command was also woefully inadequate in both size and skill, causing a lack of organization at the operational level, compounded by severe failings at the tactical level in North Africa and elsewhere (building stone forts which could be easy isolated or bypassed altogether). The Greeks were able to conduct a strong defensive campaign in difficult mountainous terrain which negated the numerical advantage of the unsupported Italian infantry- 600,000 had been inexplicably demobilized just weeks before the invasion.

So basically Italy had a large army of lightly-equipped and trained infantry which it could not hope to command and supply effectively. I believe Rommel was quite complimentary of the Italian soldier under proper command, and the 8th Army seems to have served adequately on the Eastern Front, but blunders from the top caused a lot of issues.

The Italian military was in the process of modernizing at the time, which is why they didn't join the Germans until after France had been beaten. The British in Egypt had a well organized and fairly modern force albeit rather small. im not that familiar with the specifics of the campaign in Abyssinia but In the Greece campaign they had trouble with lack of information and again their lack of a fully modernized army didn't help in the rather mountains and hill terrain of Greece.

Also the Italians did see action in Russia which went about as wonderfully as you'd imagine with the prior examples.

In addition to the earlier responses, there are two manpower issues as well. The first that the Italian officer corps had some professionalism problems. Absolutely, it was not universal, and the sharper units such as Bersaglieri and armored divisions performed very well. (It is my opinion that the Italians get nowhere near as much credit for their work in Africa as they should. Example, many Americans know about their setback at Kasserine pass, few acknowledge that it was an Italian unit which broke the American lines, even if they know the Italians were present). However, in many units, the officers came from the metropolitan, upscale areas, the enlisted folk were the rural peasantry, and the officers treated the latter as such, with predictable results. Witness Rommel's comment about "if properly led."

The other matter was that of motivation. The Italians never really bought into the whole "we're the master race and it is our manifest destiny to conquer" business that the Germans were pushing. Fighting to the last man just didn't seem to hold much appeal. Again, many soldiers were brave and competent, and they would fight until the last bullet, maybe, or until the position became hopeless, but they saw very little percentage in dying for Il Duce.

Combine thse with the resource issues dealt with by Rosstafarii, and you can see why the Italian forces never really met the battlefield capability they wanted,