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For the crafted item sets, see Demon's Skin and Demon's Hide.

Demon Skin was a Legendary Crafting Material in Diablo III. It requires a Character Level of 1 to use, is account bound, and may be stacked up to 1000 times. It was required for the crafting of each piece of the Demon's Hide set. As of patch 2.0.6., it no longer drops, and existing Skins may be sold for 50,000 Gold.

The item had a chance to drop off the unique Phasebeasts and Armored Destroyers:

The skin seems to phase out of existence and then return again as if nothing happened.

Diablo III Crafting Materials

Regular Salvaged and Dropped Materials