Items can be looted only by clicking on them. In D:OS there was a possibility to loot by clicking on the name of the item (highlighted with Alt). It's really hard to loot small items, f.e. a potion in the grass!
Items can be looted by clicking on the highlighted name, though sometimes you have to double click for some reason. Most of the time it works fine, for me at least. Video
For me it requires 6+ clicks on the label.... and literally never works aside from maybe 5% of the time. The other 95% of the time my dood just flat out walks where the label is floating like yours did on click 6 or so (even if that is on fire or poison.. great fun not.. ~.~)
Why don't I have that fancy console pickup circle thing on keyboard by the way? How I get that? Because I would rather want THAT than click every single item)