Originally referring to the naked fakirs of India, Gerald Gardner--the founder of Gardnerian Wicca--imported this to replace the more pedestrian words nude or naked.

Witches/Wiccans/etc. consider working "skyclad" as more conducive to magical workings and energy. It is not meant as a gateway to orgies; I've yet to be to a ritual that ended in an orgy. (Nor would I want to, knowing some of those people all too well.)