As you kill enemies, complete story missions, liberate outposts, gather collectibles (relics, etc), you gain player xp. Story missions average thousands of xp, and collectibles such as relics and lost letters award you 250 - 500 xp. There is a small meter that appears every time you earn xp.
When the skill meter maxes out each time, you unlock a skill point. Skill points can be spent on "Skills" in the menu by pressing start (in game) and clicking Skills.
There are 3 different categories of 'skills' (use RB/LB to scroll), which allow you to upgrade your player with skills such as extra health bars as well as advanced take downs, sneaking abilities, enhanced abilities, etc.
Most importantly, after purchasing a skill you receive a tattoo on your arm, gradually engrossing your whole arm with each tattoo. Earn 5 of these to unlock the achievement.