The Blacksmith Skill upgrade increases the average quality of your crafted picks. The mouseover text implies that each upgrade gives the user a +1% boost to the general quality/average quality of the pickaxes crafted. However, experimentation has shown that this is not the same as the "Qual:" measure that's displayed; it depends on what other upgrades you have and the setting of the gemwaster.
Blacksmith Skill starts out being displayed at 100% and can be upgraded 30 times, to 130%. The price to upgrade is 4.2 x (Previous upgrade cost).
This is the cost of each upgrade. It would be appreciated if anyone left in the comments (or edit the page) the value of any of the upgrades, all we have for now is those E+ values for higher upgrades.