Skub's backstory is revealed in flashback in volume III of the series. Skub was the youngest of four sons, the child of a famous Goblin warrior and the only chef in the Goblin Kingdom.
When Skub's mother was eaten by diners who mistook her for the second course of a meal she had prepared, Skub's father decided to send all his sons - except Skub - out into the world to make something of themselves and learn a trade.
Five years after being sent away the three sons all returned and demonstrated their various accomplishments, impressing their father with what they had learned. Soon after their return a dragon appeared in the Labyrinth, and Skub's father sent his three oldest sons into battle to fight it. With no knowledge of combat, all of them died.
In light of this, Skub's father sent him to train as a warrior in the Goblin Army, an experience Skub only survived due to his strength for hiding. One day a dragon appeared and Skub's father ordered him to enter the cave and kill the dragon so as to avenge the memory of his dead brothers. Skub was too frightened, and upon learning of his son's cowardice Skub's father cut off all contact with him.
Much as Hoggle was the coward of the movie, Skub is the terrified nobody of the manga. He is innocent and does not seem to share most goblins' sense of superiority. Skub speaks of himself mainly in the third person and attaches himself to Toby, much as Hoggle came to respect Sarah, because Toby found value in him. His job as chef is brought about by an amusing twist of fate, a very muppety one at that, but for awhile Toby wonders if he is going to starve, because Skub is completely unfamiliar with human food and tends to be quite literal, thinking that the elbow macaroni means he must procure actual elbows (fortunately, he doesn't have to ... they use knees of a kind of rat creature instead ... yum).
As Mizumi's takeover progresses, Skub finds the courage to stop hiding and do what he does best ... support others in times of crisis, which becomes even more important after Spittledrum's act of heroism.
Skub represents Toby's insecurities and innocence.