A skill is simply a task that you can perform. Some skills can be done by many people, some skills only by a few.
A capability is a process that uses a set of skills where you take inputs and resources and create something of value.
Capabilities can be as simple as providing a skill. Someone who has a certain skill can create a capability where they sell their time where they perform the skill. We call that being an employee.
To live a full life where you have control and freedom, you need to create capabilities that you have more control over. Determine what value can be produced with your skills and create that in the world. An effective capability is one where the value of the outcome produced by the capability is obvious.
The better you become at putting your skills and resources together the more value you can create. When your outcomes are valued, people will compensate you in order to get the outcome.