A site skin lets you customize your browsing experience when you are logged in to your account. Don't like the Archive fonts? You can change them! Don't like the red header? Swap it out for blue! When you make a site skin, keep in mind that you are only changing the Archive for yourself -- other Archive users will see the Archive in whatever skin they are using. In other words, site skins are useful for creating your own ideal browsing experience, not for changing the way a work appears for others.
A work skin lets you change the way one or more of your works appears to others. Work skins will only affect the body of the work -- that is, you can't change what the Archive navigation or background look like for someone else. What you can do, however, is create your own classes. For instance, you can change the color of some of your text, or indent some paragraphs in a particular way, and so on.