Fish skin gelatin, a naturally derived functional protein with excellent bioactivity and widespread availability, holds significant potential for applications in the food, pharmaceutical, and biomaterial industries. However, its industrial utilization is constrained by inherent limitations such as weak mechanical properties, inadequate thermal stability, and variations in functional characteristics arising from different fish species. This review provides a comprehensive overview of the structural composition of fish skin gelatin and its impact on gel properties, elucidates the mechanisms underlying its emulsification system, and examines various modification strategies. Furthermore, key approaches for improving its thermal stability and emulsification performance—including physical, chemical, and enzymatic modifications—are systematically discussed. Recent studies indicate that techniques such as cross-linking, glycosylation, blending, and emerging processing technologies (e.g., UV irradiation, ultrasonic treatment, and subcritical water hydrolysis) can effectively enhance the functional properties of fish skin gelatin, thereby expanding its applicability in food processing, biomedical materials, and functional packaging. Advancing research on fish skin gelatin is expected to play a pivotal role in fostering sustainable development in the food and pharmaceutical industries, facilitating the high-value utilization of fish skin, and providing scientific and technological support for environmental conservation.