Cquote1Hey, hey look I found one oh, wait, nope thats a grunts skull. NevermindCquote2
— A n00b playing as an elite in co-op

The Skulls are heads of humans that have rotted for so long that the skin and flesh are gone and when the Master Chief picks one up he gains super powers, which range from having no radar to making his enemies stronger. The more useful ones get you superduper powers like bigger explosions, funny dialogue (like the Grunts need anything more funny to say) and the strange power to make grunts heads explode in confetti when shot in the head, shouting an extremely childish "YAY!" sound as they die.

The skulls are usually found in random hard-to-get-to places, showing that the Bungie team had too much time on their hands and need to get laid.