Reversing in the first place is almost certainly illegal if you were to check the Skype ToS. Making a profit off it is just asking for trouble. I could be wrong though.
ToS only applies to terms of continuing use of a service, if you're prepared to not be an user anymore, then the conditons of ToS are not worth the paper they're (not) written on, you can simply not accept those terms. Click-through and shrink-wrap licencing terms are not binding almost everywhere (they likely could be in USA, though).
And while USA has DMCA, in most of the world copyright (as according to Berne convention) doesn't prohibit reverse engineering but only grants a limited monopoly on copying with some exceptions - often including interoperability, so you can do that even if the copyright holder disagrees.
For example, to distribute the system obtained by reverse engineering to your customers or include it in your product; none of this needs your engineers to be actual users of the (possibly competing) service. The interoperability exception in copyright laws is exactly for this purpose, to allow companies to distribute competing products that are interoperable with something that doesn't want others to interoperate. You're not required to make it easy for others to interoperate, but if they manage to do so, the government won't hold your copyright as a valid reason to forbid it.
Violating a law is "illegal" in the sense that it may result in penalties prescribed in that law.
Violating a contract is "illegal" in the sense that it may result in contractual penalties, generally limited to compensation of the damages, possibly with punitive tripling; but it may and should be done if the contract has gone so bad that it's better to face the consequences rather than fulfill the contract.
Violating ToS (which is not even a contract) is "illegal" if you really stretch that term; it may result in losing access to that service, and nothing else (excepting certain US-only legal perversions like CFAA which happily don't apply for most people in the world), so you may do that if the benefit outweighs continued access to that service.
I'll agree that illegal was a stretch especially since IANAL. I will say that is at least unethical by my personal standards. On a practical note, I'd much rather see people investing their time in making better alternatives than reverse engineering.
Reversing are explicitly allowed in EU government as other based human laws.
I mean, EU have a much more great priority then Skype TOS.
If someone will add to Skype TOS "and please dont breath or dont go to toilets during use of our application". It will have zero effects in legal meaning. Because it break upfront law and United Nations based rights and etc.
tldr;
They just try to fear you with "dont do this" thing.
