The skin peeling thing is due to an abscess. Basically, junkies skin-popping over and over with unsanitary equipment introduce bacteria into the tissues, (Usually Staphylococcus aureus, though any hearty organism will do.) whereupon they have a fine time eating the tissues, reproducing and crapping out toxins until the infected flesh becomes necrotic and sloughs off.
Drugs Are Fun, yupyup!