This skill is no longer in use as of v.3.13
Woodcrafting is the skill of decorating wooden items by carving designs into them. All wooden items can be decorated, including things such as firewood and punts, but not javelins. The higher your skill, the more likely that you will successfully carve a beautiful design. The better the decoration, the more the item is worth.
As of the current version (v3.12b) there is no way to tell apart different levels of carvings, apart from storing them in different stacks.