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What the hell is that? What does it represent? What it is trying to tell me?

I think the graph attached to it --which is the result of this equation-- is quite clear: it shows that chance to improve the skill continually drops as the current level of skill increases. This drop is not linear, but becomes progressively faster as the skill level gets closer to the top level.

This isn't something the player is even going to see (the skill system is more likely to wind up described as "the closer you get to top, the harder it becomes to get even better", maybe with that attached graph for these who _really_ want to know their chances) ... it's just a piece of code for the computer to actually convert what's obvious for the player, into the underlying numbers.

In a nutshell, the _graph_ is your 'symbol that the brain works with', the stuff with numbers is merely implementation. Same like implementations for the pen & paper games which were simplified out of necessity, to maintain any sort of game pace. When you can have computer crunch the numbers at breakneck speed, this simplification is no longer necessary and you can focus more on having things work just like your brain envisioned them first, in its symbolic way.

It's no different from complicated math hidden behind the player's ability to grab a chair and throw it at nearby critter. We know instinctively how thrown chair will fly, and we know instinctively it becomes continually harder to improve, the better we get at something. The computer doesn't know this and needs to be told how to simulate it.