There's no real way to explain any of this. it's VERY subjective and more than any other part of the painting process, the many ways, methods and techniques that you can employ are endless.
Most importantly, have a good idea of how a weathered plane looks, what goes into making it look as it...

I had a question for you. how do I get the same effect on step 2 . I select the inverse,I do the inverse ( reduce it by quite a bit) How do I reduce?. I end up getting the whole layer as one color. Not within area were it supposed to be.

Hmmmm...
That could be a lot of things. Try backtracking a bit. Make your selection first, on a new layer try filling that with a noticeable color like bright red. Do you get the panel lines in red? If so, next try selecting inverse and filling that with red. Does it fill everything but the panel lines? If so, next reduce your selection. Remember, if it's feathered and reduced too much you will fill the hole thing. Try pulling back only a few pixels to start with, like 5 or 6, then feathering 4 or 5 pixels. Does it fill correctly?
If all that checks out it's just a matter of finding out how much to reduce and feather.
You can run into another problem where PS will tell you "Warning: No pixels are more than 50% selected. The selection edges will not be visible."
Sometimes you can still fill your selection even if this window pops up, but other times you'll not get anything.
If none of that helps, maybe it's making the selection itself that's not working.
Try that stuff and let me know what happens.
(I hope it works thought )

Got it right now, Thanks a bunch for the infomation.

Thanks so much for this tutorial, Blowhard. Your techniques are completely new to me and I never would have come up with them on my own. I learned a lot from this tutorial and have gotten good result even with my first attempts.

If someone could come up with a comparable tutorial for dirt/smoke/grime I might actually get the hang of this skinning thing.

Blowhard, thanks again, and thanks to Serval for hosting.

Glad it helps
I'll see what, if anything, I can come up with for oil and smoke. I've never felt like I was too good at that though :P