Skins are image files that are stretched over Warcraft 3's models to give them colors.
You can edit skins by taking them out of one of Warcraft 3's .mpqs and editing them, then putting them into your maps.
Skins are stored in the .BLP format. This is just a special version of the .TGA format. Yiu need a converter to edit them, like Warcraft3Viewer, which you can find in the Editing Tools forum.
Ok lets imagine a model. It hasn't been Uv wrapped (no colors on it except for green, its all dark green). Then you make a .blp (skin) that puts textures on the model. That way its not an all dark green model.