When the host has a fast Internet connection, iChat has better quality the video and audio sound fantastic. But this also requires that both the host and the receiver have to have the right ports open on their connection, etc., which means that there are several factors that could cause problems with a connection being established.
With Skype, the quality is not as nice as what iChat has to offer, but connections tend to be more reliable. Skype figures that people just want to see each other and it works just like that. Sure the video doesn't look as crystal clear as iChat's does, but Skype also requires very little setup (compared to iChat, in which every factor of the Internet connection must be taken into account).
So... iChat has better quality when using a good connection and open ports. But is less reliable because sometimes people aren't able to change the ports and settings for their connections.
And... Skype is more reliable because it "just works," regardless of the connection type or port settings but, at the expense of losing a quality video stream.