Piratecat
Sesquipedalian
No, seriously. the trick is not over-thinking it. The awful thing for skill challenges is to get too fiddly - "I'll specify ahead of time which skills can be used, which skills can't, and which ones have an altered DC." That just sucks all the joy out of the prep time. If you do it on the fly, here's my guideline:(if you have the creativity and exceptional feel for encounters that Piratecat has...)
Set a starting DC based on how hard the challenge should be (medium is usually appropriate). A PC suggests a skill and describes how they'll use it to succeed. If you say "That makes total sense!", it's relatively easy, knock 2 off the DC target; if you say "that's reasonable," it's the normal DC target; if you raise an eyebrow and slowly say "yeahhhhhh.." in that tone of voice, add 2 or more to the DC or (if it's really inappropriate) disallow it. This lets the players be creative while still rewarding the more reasonable skills.
Feel free to play around with timing, by the way. For example, this skill challenge wasn't constrained to rounds. Multiple rounds passed as they ran, because I wanted to move them from place to place to keep the fight interesting.