It creates an alternative data structure to binary trees.
To quote the inventor of skip lists, William Pugh:
For more details on how skip lists work, see Pugh, William. Skip lists: a probabilistic alternative to balanced trees in Communications of the ACM, June 1990, 33(6) 668-676. Also, see ftp://ftp.cs.umd.edu/pub/skipLists/
For a visual demonstrations on how skiplists work, see SkipList Demo.