Silenus pretty much has it down but I think it would be helpful to state the general use of italics in narrative writing that I've seen.
Unless the person speaking is placing some kind of special emphasis on that word or phrase it's not necessary.
I've generally seen it used in the following ways:
- "Oh that's real mature," she teased. (The use of sarcasm.)
- "Oh God... Sounds to me like it's inside the facility." (A state of distress or disbelief.)
- The book was eloquently titled Magic Chickens and Where To Find Them: A Guide to Avoiding Fowl Play. (The title of a book.)
- "Stop! Who would cross the Bridge of Death Must answer me These questions three Ere the other side he see."
"Ask me your questions bridgekeeper, I am not afraid." (This example has two: Stop! is spoken in a forceful and commanding way. The rest is singing or the reading of poetry.)
- (Displaying another language that is unusual. For example reading an ancient inscription off of an object.)
It's generally just used in order to get the readers attention about a certain idea that may be critical to the story or that part of the story. For example, in the case of a riddle you may want it to stick in the reader's head for later. It is still subjective and up to you but these are ways that I've personally seen italics used in narrative.
Answering your other two examples,
John Doe, or Big John as he liked to be called, went to the market.
He wasn’t comfortable around rich people whom he called fancy folks.
I'd use quotes in these situations. They're subjective references formed by other people. They're not terms everybody agrees on and personal nicknames for something but either for the purpose of sharing information or having no alternative you use those terms; i.e. 'Those are the kind of people he calls "fancy folks". I don't see what the big deal is.'
The second example doesn't need italics unless there's something weird about the word tablet.