Please don't think for a moment that I carry out or even condone skimming, but I can tell you exactly how most of it is done these days and, indeed, before T-Cut became a 'skimming agent' in the mid-90s. When I first started visiting record fairs in the late '70s, it was a rife, unscrupulous practice even then.
Skimming is the effect caused by holding a record up to steam until it almost buckles. Then the vinyl is pressed down on, flattened, and cleaned in a circular motion. This buffs the vinyl, melting superficial marks in so that they are no longer visible, and making scratches a bit smoother to the touch (to the point of them looking like scars). The fact that most skimmed records play terribly is because the grooves become compressed, and/or dirt becomes trapped in the grooves, as a result.
Contrary to much belief, a layer is NOT removed, neither is a lathe used - just two hands, a cloth, and a steaming hot pan / kettle is all that's used.
However, this does not appear to work on American vinyl, so there's another question waiting to be answered.