This may sounds kind of stupid, but what exactly is the function of levelling? I mean, let's say your character hits level 50 and so cannot activate perks any more, what does being level 92 at lock picking for example do? If you can't get any more perks then does levelling up your lock picking still make it easier for you to pick locks somehow even without perks? Or what if you want to create dragon armour but have used all of your perks on other things? Does getting your smithing level at 100 still allow you to do that?

This is without mods, mind.

Perks do not stop at 50. I'm over 50 and still getting perks per level.

Also, the skill level DOES matter, but not in the way of smithing like you described.

For the purposes of crafting, you do need the perk to craft the item.

The rank of the skill though does determine how well it can be upgraded (do realize you need the perk to upgrade the item though).

And yes, skill ranks in general do improve the quality of using that skill. Perks are icing on the cake.

Each "level" is the point at which you are awarded one more Perk point and your choice of +10 in stamina, health, or magicka. Leveling also has an impact on what you'll find in new caves and dungeons since there's a small amount of encounter scaling in the game.

Skill levels still matter even if you're not perking. A 100 lockpick skill is way better than a 75 on any given lock in the game, even if you have no perks. In the case of smithing, the ability to create armor is a function of perks, but the amount any given armor (looted or created) can be improved is a function of your smithing skill.

Hope that helps.

Thanks everyone, it cleared things up.

Skill levels often don't do terribly much, while perks are notably more powerful in shaping your character. Skill ranks in spell schools, for example, just reduce the cost of spells, they don't make them more powerful. Perks in spells increase power or add new functionality, however.

Level scaling also comes into play when creating enemies, however, as the game tries to balance the enemy's level to your own level. This means that dragon attacks, for example, will have stronger dragons the higher your level. Quest boss characters often have leveled amounts of health and damage that they deal to scale with your character. Hence, a quest boss might have 100 or 2500 health based on whether you are level 1 or 50.

Could you find a link or anything to confirm that? Cause from my understanding after reading the wiki skill points don't matter except if you get a perk.

No links off the top of my head, but play long enough and you'll see it plain as day. As you level up your heavy armor or weapons, the damage and armor values increase on their own, even if you're not perking in those skills.

Alright just tested it with the console to be sure.
Heavy armor value did increase.
One handed sword dmg did increase.
Spell values with destruction though remained the same.

Mana cost decreases.

Indeed - didn't notice that one!