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Larceny is non-production skill. It is leveled by stealing crops from player farms that haven't been taxed, or from "at risk" farms (farms placed in the "wilderness") and also from livestock owned by other players. All three of these options for raising your larceny will also give you doing so you infamy (crime) points.
Alternatively, larceny may be leveled through the opening of coinpurses that are dropped from most mobs. Opening coinpurses costs a number of labor points dependant on the level and rarity of the coinpurse. Opening coinpurses does not give you infamy points.
Higher levels of larceny reportedly give you less chance to leave behind evidence, such as footprints or bloodstains, when committing crimes, as well as increasing the quality of loot gained from coinpurses. 
|Item||Level Dropped||Labor to Open|
|Farmer's Coinpurse||1 - 10||1|
|Priest's Coinpurse||11 - 24||2|
|Merchant's Coinpurse||20 - 31||3|
|Noble's Coinpurse||31 - 40||4|
|Jester's Coinpurse||40 - 55||5|
|Librarian's Coinpurse||51 - 55||15