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When you aim at the carcass, it will tell you the tier needed. Tier 2 is any knife that is iron or above. Even the junkiest cheapest workshop knife counts as tier 2, so buying the mxc knife is a great early game investment. It makes a decent weapon too, but it wears down quickly.
3 ways, but large creatures require a knife of sufficient quality
(iron can basically do everything, bone is a nice QoL one as it can skin small things and be repaired with a bone on person..not durable, but doesn't wear "real" tools so is good for corpse clearing)
option 1. kill a creature, take out your knife so it is in your hand and use the interact key as prompted on the screen, you'll skin the creature and can loot it
option 2. kill it and if it is small take it to a skinning bench
option 3 is extremely unreliable, but sometimes you can get wolves to "skin" dead enemies, not a clue what causes that, either way the loot is better with a knife or bench so it doesn't matter
iron tier knives are good enough for everything, bone knives are lower tier but good for destroying corpses/bone piles to avoid predator attraction, you likely won't replace or need to replace an iron knife until titanium or the ventura from the workshop