Titan Quest IT has this potion that I can buy to change my skin color. Why would I need this for? Does it give an advantage in any situation ?
Skins only have a cosmetic effect in Titan Quest.
In any case, are you sure you're using unmodded TQ:IT? because I do not recall any potion that can change the skin, though there are mods such as AllSkins that work by populating vendors with such potions (that can change a lot more than just the skin tone).