A machine designed to slowly and carefully remove the outer layers of whatever is put inside.
This nasty machine is something the player should avoid. Owned by the Skin Bandits, they will use it to skin alive Humans that they have captured and taken to one of their Skinhouses. It is possible to put skeletons in such a machine and kill them.
As of update 0.99.5 (experimental) it is possible to acquire the blueprint of this from Savant.
The Peeler Machine also produces Animal Skin.
Skeleton-Human Transformation Bible
Savant's secret alchemical formula for turning skeletons into humans