Yes, they regress over lifetimes. I'm not sure if they will go away if you don't use that skill for an entire lifetime so I'll get back to you on that, but you can expect that if you are a master blacksmith in your first life, and an apprentice in your second, then your third life you may have a lesser skill ramp than you got for your second.
Edit: Here we go
As for "skill levels" - Skills do have skill levels and you can max out a particular skill. However, skills can get "rusty" if they aren't used, so just hitting max isn't a guarantee that your skill will stay maxed out. Likewise, aging takes a toll on your character and that can affect your ability to use your skills and the gains you can make, when. Finally, death itself will certainly set your skill development back. ;) But more importantly, your skill ramps decay based on usage too. If two characters back, you had a really high blacksmithing ramp, but you haven't smithed anything since then, chances are that ramp is all but gone by the time you start a 3rd generation character after that. - Snipehunter