I'm not giving this episode my full recommendation just because it's the first time since the second pilot that Star Trek saw a series regular leave (of course, famously, Spock is the only holdover from "The Cage," whereas Tasha Yar is the only regular to leave via death until Jadzia Dax), but that's certainly a good place to start.
Let's just sit with that thought for a moment. The cast of Next Generation seemed pretty fixed by the time it reached the movies, but in truth as the final episode helped fans recall there was at the very least the notable absence of Yar, who was a huge part of the growing pains from the first season. Denise Crosby grew dissatisfied with the lack of challenging material, although she might have recognized before anyone that the series had already outgrown her. As certain characters (La Forge, Worf) struggled to find their useful functions, Yar was already slipping out of hers, well before her departure via Giant Oil Creature of Doom.
She's the star of one of the season's worst episodes, after all, "Code of Honor," which may have given her the unfair distinction of having been one of the reasons for its failure, although it really has nothing to do with Yar. If it had been Riker or Picard or Crusher (a character so nebulous throughout the season that she was removed for the entire second season), maybe it would be a different story, but Riker couldn't salvage "Angel One," either, although he shined in "11001001" and got to play god in "Hide and Q." Yar's lasting impact was a fairly throwaway moment in "The Naked Now" that became much more significant when she dies in "Skin of Evil" as Data remembers her unique contribution to his development.
Her role in this episode is just as negligible as throughout most of the rest of the season. Though she wears yellow, Yar is all but a classic red shirt. The episode, surprisingly, belongs to Troi.
That's the real surprise, if you haven't watched "Skin of Evil" in a while. The title refers directly to the Giant Oil Creature of Doom, the castoff remains of all the negative elements of a long ago civilization. Not a hugely dignified murderer of Tasha Yar, but it's Troi's interactions with it that bring true significance to this aspect of the episode.
Troi in many ways was the reverse Tasha (in fact, Marina Sirtis and Crosby were originally cast in the opposite roles). Although she had "Haven" as a spotlight, Troi was all but absent and virtually insignificant throughout the season, even though she was the other half of Gene Roddenberry's surrogates from The Motion Picture along with Riker. She's pegged as the most obvious element of 1980s mentality in Next Generation, the counselor on the bridge of the Enterprise, but at the start had very little to do, and her empathic abilities might be said to be pretty pathetic.
Except, finally, in "Skin of Evil" Troi pretty much gets her "Devil in the Dark" moment, very much reminiscent of the moment in the original series where Spock's Vulcan mind meld became important for the first time. She engages in an extended conversation with the creature and is responsible for disabling it, thereby rescuing not only herself (she's trapped in a shuttlecraft the whole time) but the rest of the away team. It's the start of the possible realization that Troi is a hidden treasure of the series, which perhaps only Voyager really appreciates later on, bringing her back in a few of the Barclay episodes. (She's also one of the Next Generation alumni to appear in the infamous final episode of Enterprise).
There you have it, then, my explanation for how "Skin of Evil" is a new Star Trek classic.
franchise * series * essential * character
Memory Alpha summary.