From what I understand, installing the game to the HDD, helps with increasing load speed (ie: zoning in and out of an area, loading a saved game, etc) and, supposedly, makes for smoother graphic rendering.
I played RAGE without installing and loading times weren't terrible, but noticeable. After installing, loading seems to be about half the time and the graphics didn't seem better, but seemed to render seamlessly.
Haven't tried it with Skyrim yet