Skill level or skill knowledge level is a percentage value indicating how well a character knows a particular spell or skill i.e. how skilled they are at using it. This is not to be confused with warrior or thief skill level which is entirely different.
Spell <spell> or Skill <skill>
Typing spell or skill on it's own with no arguments will display all spells or skills your character knows.
Each time a spell or skill is used a check is made to see if it is successfully. Skill level is one of the factors cheeked. Note: the percentage is not a true percentage check as there is an offset and even when a skill is learnt to 100% perfect it can still fail.