I do not know how The Isle Development Team plans on implementing the Steam Workshop, or what file types they will be accepting to use as skins for dinosaurs. This method of creating a skin may result in a filetype that is not compatible with the way skins will be implemented in the future, and may have to be converted. It is still very early in development and there are many uncertainties.

This is just one method I have discovered to paint your own skin, and I am sure there are many more.

All models and original skins are copyright The Isle Development Team.

http://gtm.you1.cn/groups/skinpaintersoftheisle/

This is anything that can open and edit a TARGA file (.tga)

My suggestions are one of...
Download Photoshop CS2 free[helpx.adobe.com]
Download GIMP free[www.gimp.org]

Specifically must use XPS/XNALara to use the method in this tutorial.

Download XPS/XNALara[xnalaraitalia.deviantart.com]

The textures, UV maps and meshes directly extracted from The Isle.

1. Download and extract the model that you would like to create a skin for.
   
2. Move the extracted folder over to the data directory in XNALara (…\XNALara_XPS\data).
   
3. Run XNALara XPS.exe to start the program.
   
4. Select the model you would like to load using File > Add Model(s)…
   
5. The model will open using the files it finds within the models folder. This means you can easily edit the texture TARGA (.tga) file and press F8 within XNALara to immediately see the results of your edit.

It is strongly suggested that you edit the Albino Skin for the creature you want to colour. This gives you a white base with minimal markings to start with.

Within the folder you downloaded, find the file called Name_D.tga. This is the file you must edit in order to change the textures. It is outlined in red below.



Open the Name_D.tga file in your preferred image editor and begin colouring. Note that if you colour over the scale outlines you will not see the scales on the image. Below is the file opened in Photoshop.

These are example skins that have been created using the same method as described in this tutorial.