What is the Skip texture?
The Skip texture is a special texture in the Quake engine. Any face with the SKIP texture applied is omitted from all hulls by the BSP compilers; in other words, it does not appear in the final level in any form. It is, for all intents and purposes, not there. Nothing. Nada.
Why would I use a Skip texture?
If you apply the Skip texture to a normal brush, the final effect is messy messy messy. You'll see the Hall of Mirrors effect, for a start, and holes will appear in the level wherever you applied the Skip. That's if it compiles at all - Don't Do It. Instead, their use is to be applied to those faces of a hint brushes that you do not wish to interfere with the BSP tree. Generally speaking, one would apply SKIP the all faces but one of a brush.
There's no compulsion to use the Skip texture, for causing a few extra splits in the BSP tree may increase compile time somewhat, but the end performance is unlikely to be much different. The Skip texture was more necessary in the days of the original Quake I compilers, when the VIS data was limited to 1MB and so splitting things up unnecessarily was bad news. Nonetheless, it is good practice to apply the SKIP texture wherever possible.
You can build enormous and detailed brushes from the Skip texture, because the compilers and the game completly ignore them. No idea why you'd want to, but you can.
How does it work?
Like all the special brushes, it is invisible to the engine. Both BSP and VIS omit the face from the visual and clipping hulls, so the engine is given no indication of it's presence at all. Simple, no?
See also: clip brush.