Payload encryption means they can't know what the communication content is, but in some cases they can still know what protocol you're using (In this case Skype). This is how countries block Tor, for example.
Methods to detect the protocol being used even if it's encrypted:
IP-based: TCP is not encrypted even if the payload is encrypted (So that computers can route your packets). The country can tell where the packets are going, and block them depending on their destination IP Address.
Port based: Same as above, but based on the destination port. For example: XMPP uses port 5222, if I block all packets connecting to port 5222, I block out XMPP even if it's encrypted (Unless users and servers use non-default ports)
Handshake based: Many (maybe all) encrypted protocols start the connection unencrypted, and then the two sides "shake hands", the handshake envolves sharing the cryptographic data needed in order to begin using encryption, so it isn't encrypted. Packet inspection can work here. For example, the first few packets of the https handhsake are unique, not encrypted and can be indetified.
VPNS are effective against all 3 methods mentioned above because they route everything through an already encrypted connection. TCP is wrapped by the VPN protocol and sent through the VPN Protocol. This means your country cannot see the destination IP, the port, or the handshake because it's all wrapped in an encrypted TCP connection originating from your machine and ending at the VPN server. However, your country might be blocking the VPN protocol in the first place. (Unlikely)