Quick tutorial to show how to make a skin in 10 steps!
This is an updated guide due to the one that most people use is kind of hard to understand at points. Ok, so making a TF2 Skin is actually quite simple. Well, at least for the stock weapons.
Anyway, below is a quick guide to help you with your skin making.
First you are going to download the following programs:
GCFScape - Here
VTFEdit - Here
Any photo editor - GIMP, Photoshop, or another of your choice
Now let's get started!
1) Open up GCFScape.
2) Now when you are in GCFScape, you will want to click the open symbol, and click on 'team fortress 2 materials.gcf', and that will load the files.

3) Now you will want to go to the tf folder. Then click on 'materials', and then scroll down until you see 'models'. (Make sure you don't open the 'models' folder in the 'tf' directory!) Then click on the 'weapons' folder, and choose a file to edit. I will be editing the medigun today.

4) Now what you want to do is click on the folder 'vmedigun', and right-click it. Then click 'extract_', and extract it to a folder of your choice. Once you have done this, you need to open up VTFEdit.
5) Inside VTFEdit, click on the open symbol, and navigate to where you saved the extracted vmedigun folder. When you are there, select the 'vmedigun.vtf' file. Then, go up to 'file', and click 'export'. Choose a place to export, and make sure the file format is .tga.

6) Now open up the .tga file in a photo editor, and start customising away! Have fun with it!

7) Once you are done, save over the original TGA file, as you do not need to keep a backup. You can if you want to, but you don't need to.

8) Now that you have edited the skin, go back into VTFEdit, and go to 'File', click on 'import', and import the 'vmedigun.tga', (must have 'vmedigun.tga' as the file name!) and then click 'ok', and the click on the save symbol.

9) Save this in the same folder that you extracted the game files from. It will ask if you wish to overwrite, and you should click 'yes'.

10) Now you can copy the extracted folder into your 'C:\Program Files (x86)\Steam\steamapps\

And there you have it, how to make a TF2 Skin in 10 easy steps! Hope you enjoyed!
TROUBLESHOOTING
Help! When I open up the textures in GIMP, the images are hardly visible!
That's because you're exporting it into a .png . The alpha map isn't supported so it'll be applied, placing transparence everywhere, download a vtf plugin for gimp and open vtf files like they are, without passing trought vtfedit. - Thanks dendonflo for the help with this.
In-game screenshot is example of what they will look like.




