Since there are so many new Rust players experiencing the game for the first time, and receiving skin drops from the Twitch drop event, I wanted to create a post that explains how to use Rust skins in the game.
You can currently obtain untradable and unmarketable skins by watching your favorite Rust streamers, just follow the guide on the Facepunch website to get started. You can also buy skins directly from the Rust item store, or from other players on the Steam marketplace or third-party sites.
When you have skins in your Steam inventory, you can now use them in the game. Make sure you restart your game client, and then they will be able to be used in the following steps.
If you already have the item you want to apply the skin to, then you will just need to find a repair bench (you can craft one and place it in your base). You can open the repair bench by pressing "E" on it, and then drag the item you want to reskin into the top box. You will then see all of the possible skin options, all based on what you own.
You can also craft a brand new item from the crafting menu, and select the skin you want to apply from here. If you choose the wrong skin, or change your mind later, you can always change the skin by putting the item in a repair bench.
Some skins cannot be placed on existing items and owning them actually lets you craft the item in-game, such as the Twitch headset, Signs, Scarecrows, Pumpkins, and more. These can only be created from the crafting menu if you own the skin, and can not be applied to items in the repair bench.