Just wondering, since when i turn both of them to 4x and 16x respectively via the ATI catalyst centre, i get a 10 degree rise in GPU temp and 15-30 FPS depending on where i am. Without them it would be 50FPS. And also with both of them on, i noticed my screen starts lagging, like the GPU has trouble keeping up with my char. pace.
This is done without ATI powerplay. So does AA and AF kill the GPU faster than without AA and AF?

If you mean literally reduce the lifespan, no, not noticeably. It does put more load on it though, which means if your model isn't powerful enough you'll start seeing slow down.

Anisotropic filtering is pretty much free performance on cards now days, all the way up to x16. Anti-aliasing is very heavy on fillrate and memory bandwidth of your card and the higher the screen resolution the more AA will hit performance. Most midrange cards will be able to use AA 4x at 1920x1080 without a problem.

Edit: No it won't "kill" your GPU, just make it work harder with Anti-aliasing on.

Nope. Unless you're running your hardware at 150 degrees the temperature increase won't have an effect. Your GPU is doing more work with AA and AF enabled (although mainly AA, most GPUs can do AF in their sleep now), and therefore the temperature is increasing. AA is very demanding, everyone will see a performance drop from it. If you've got an older or weaker GPU, or you're running at high resolutions, then you can certainly see huge FPS decreases by having AA enabled.

Depends on your computer. I get like 6 FPS less with 2x AA enabled. (only noticeable in areas where FPS is less than 60)
I just use 8xAF. I could use 16xAF, but I can't notice a difference, and it seems to very slightly help with performance by using less. Even if the difference is 60 FPS vs 59, it's worth it to me. I can detect a difference in smoothness when it gets to about 56 FPS, which is sometimes the case in rare parts of the world.

However, I use Ambient Occlusion, which is also using significant resources, but I love it: http://international.download.nvidia.com/geforce-com/international/comparisons/skyrim-AO-comparison-3.html
(shading on all objects. Drag the slider to compare)

Oh yeah, to answer the question, as long as your GPU isn't overheating, then it won't kill it. I don't know if there's a difference in life expectancy between using it slightly, and using it 95%, as long as you keep the temps right.

It's not mechanical, like a car engine. On that note, I suppose the fan will wear out faster if it has to spin faster. I've rarely heard of the fan dying before the video card does, however.

Since you are using the ATI Catalyst, it depends on what kind of antialiasing you are applying. If you, however, are applying the SSAA, you had better believe it's going to tax your gpu. But it literally won't literally kill it, the gpu will simply run at it's maximum ability and, if you don't have a beast of a card, the frame rates will be slow.

Edit:

Also, from my experience, adding AA through the Catalyst doesn't totally override the in-game AA. And putting the in-game AA to zero or one, and attempting to force AA through the Catalyst merely disables AA completely. It also seems that the AA from the Catalyst scales directly with the in-game AA. It's hard to tell exactly what is going on because, with Skyrim, you simply cannot just override the in-game AA.

I'll second that (I have a 4870x2). I think turning AA in the driver for Skyrim is just a waste of GPU cycles- I experimented with my setup and I can confirm it has absolutely no effect. As a consequence I've set my in-game AA to 4x and turned off the driver AA.with good results @ 1900x1200 On the other hand I've confirmed that turning on AF at the driver level does indeed do the job, so I've turned it off in the game and on in the driver, again with good results.

If you do set a setting in the driver you should turn the corresponding setting off in the game. Otherwise the game and GPU will both be duplicating their efforts since unless I'm mistaken, the game doesn't know anything about what the driver is doing and vice-versa.

I use 4xAA perfectly fine.

AA perhaps, but AO absolutely not, any card in the last 10 years should be able to handle 16xAO with no fps change at all, its pretty much a god given standard at this point.

I assume you mean AF, AO will lower your frame rate for sure.