Note: This information is from the in-game tutorial.
As well as character stats, you can improve your skills. This is done by using them repeatedly and there is nothing to stop you developing them to the maximum. You will find them in the Player tab (P). Your Combat skills are shown in a separate tab and all the others in the Skills tab.
After your third level up of each Skill, you will be given the option to choose a Perk that in some way improves or alters the use of the given skill.
Defense makes players more difficult to wound, and better at using shields, or parrying with a weapon.
Axe makes players more proficient with an axe, effectively increasing their weapon stats when they equip an axe.
Mace makes players more proficient with maces, effectively increasing their weapon stats when they equip a mace.
Sword makes players more proficient with swords, effectively increasing their weapon stats when they equip a sword.
Unarmed makes players more proficient in fighting with their fists, increasing the damage they cause.
Alchemy is a skill used to create potions and remedies from herbs and additional ingredients. To create these, players will need to have the correct recipes, ingredients, and access to the alchemist's bench.
Players with a high herbalism skill will be able to collect herbs faster and more easily. Herbs are used in Alchemy to craft potions, through the use of an Alchemist's bench. Allows the player to gather more herbs in a single attempt.
Horsemanship allows players with a high skill to control their horse better, and increase the stats of their horse.
Hunting allows players with a high level in this skill to collect more meat and other useful materials from animals that they have killed.
Lockpicking allows players to break into locked buildings or containers that are meant to keep them out.
Pickpocketing allows the player to steal items from unsuspecting victims. Increasing this skill will lower the chance of getting caught which could result in going to jail and/or paying a fine.
Reading' is learned after completing Mightier than the Sword. Increasing this skill makes reading easier and faster.
Stealth is a skill that allows players to avoid detection by lowering the visibility of the player.