Skinning is the process of glossing over the specifics of upper-layer rules and narrating something similar but different. Here are some examples.
- Replacing an Item: Using a Goblin stat block that has a sword and narrating tha the goblin has a shard of broken glass instead.
- Replacing a Skill in Play: Replacing the Small Arms skill on an infantry soldier with Gunnery to make him a door gunner.
- Replacing a Skill at Game Level: Using a set of game rules that has "Small Arms (Agility)" and replacing it with "Archery (Agility)". No one takes Small Arms anymore, they get Archery instead.
- Replacing a Whole Entity: Taking an Orc Siege Warrior and using him as a Human Bandit Warlord.
Because each of these things changes only the narration and not the mechanics of a thing, they're all perfectly acceptable.
What skinning cannot do is change the stats of a thing without also changing the value of that thing. Whenever you change the stat numbers, the xp value also changes, becaus the xp value is completely dependent on the stat values. if you decide to change the stats of a Goblin, for example, and don't bother to recalculate its xp value, you won't know how many of them the PCs can handle, or how dangerous each one actually is.