Skill challenges are best used to represent a series of skill checks where the narrative serves as the map. It removes the tedium of checking for traps every ten feet with your 10ft Pole™. The players are told their objective and then they decide what skills will best be served in achieving that. The DM sets the DC, monitors progress, and provides the story behind their success and failures along the way.
The D20 skill challenge comes from Star Wars Saga edition, and was later implemented in 4e. The skill challenges were broken down by tier and level, with the Average Tier sitting a few points lower for DC requirements. When you look at the highest tiers they seemed impossible. However, in Saga each of the heroic characters (aka PC classes) had access to Force Points which allowed them to add additional dice to rolls. These Force Points were limited by level and only replenished when you gained a level, or if you had a class feature that replenished them. They allowed PCs to strive for the impossible. It's best to keep this in mind when designing them, and letting the players know what they're doing and just how difficult it will be.
Sometimes I'll start a skill challenge with a montage scene where the PCs are scouting, planning, and gearing up for their mission. In my epic campaign the PCs had to sneak into an undead city to kill the Death Tyrant and then escape. Part of the planning montage was a trusted informant who gave them a secret way in. The skill challenge was broken up into several sections, each representing movement in and under the city. When they reached their location then it would default back to standard D&D. They could stealth, disguise, bribe, intimidate, climb, or do whatever best fit their character. The way I spice it up is I limit one skill use per challenge, and I have a Challenge Skill (or two) that must be used during every PC's turn. These Challenge Skills represent the theme of the challenge. For the undead city it was History and Religion. The DC is average (about 10-12), and represents the PCs awareness of their surroundings. Success means no penalties. Exceptional success means a +2 bonus on their next skill roll.
5e really needs a skill challenge system that's similar to Saga, not to mention an improved Inspiration that integrates with character classes, races, and even spells. It would be nice to add a little bit of spice to the game with Inspiration.