Well, I don't have first-hand experience with these things, I just know that people somehow design models that can flex :-) You know, like having a character run up steps and needing to have the foot meet the step in a realistic way, while all the vertices that make up the knee have been averaged somewhere inbetween a standing animation frame and a crouched animation frame. I kind of assumed you could make them with Blender, but have never actually done so. I would guess there would need to be some sort of equation encoded in the model, like "N * this vector + M * that vector" and someone clever would have found a way to build that into a big matrix so that you just take the "joint angles" of the model and do some matrix multiplication and get the current vertex array for the model.

Maybe every game engine defines their own format? I'd be interested to know if any open-source tools standardized on something.

Mainly, I hate it when I spend a bunch of effort making a re-usable piece, and then the very second problem I try to apply it to requires me to re-design it from scratch.