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Know Your Phrase - The Meanings For Common Phrases and Idioms > K-Letter Sayings
The origins of this idiom.
The meaning of this phrase.
Phrases and Idioms - The Definitions and Origins For Common Sayings and Idioms | Use this handy list of phrases to search for more!
To be watchful; paying careful attention to something.
* If you ever find yourself wandering through a desert, you may want to keep your eyes peeled for any dangerous creatures on the ground, such as venomous rattlesnakes or scorpions.

* My friends are coming over for dinner soon, so I'll have to keep my eyes skinned and listen for the doorbell to ring.
Note: The exact origins for most common idioms and expressions cannot be said with a certainty. What's provided are theories that may be plausible to how a phrase originated, but not necessarily so.

In addition, quotes that contain a particular phrase may be taken from old newspapers, poems, or books that were written centuries ago, but this by no means confirms that the phrase originates from said newspapers, poems, or books. In all likelihood, if an expression is being used in a newspaper, it's probably already a well known saying and is from an older time.
There are two versions of this phrase. One uses the word "peeled," the
other uses the word "skinned." As for which came first, I'm not entirely
sure, but they both convey the same idea of figuratively removing the
skin of one's eyes to pay better attention.

The word peel can mean to remove the outer covering of something. For example, think of a person peeling a banana or skinning an apple; people do this to various fruits and vegetables for the purpose of opening them up.  Hence, it's possible that the literal peeling or skinning of fruits and vegetables in order to open them is where the idea for this phrase comes from.

Both idioms, from what I could find, seem to have made their appearance at least as early as the 19th century. For example, the saying with the word "skinned" attached to the end of it comes from some old book in 1832, where it reads:

"'Keep your eyes skinned now,' said the old trapper."

The other form of the expression is used in 1852 by the Kenosha Telegraph newspaper:

"Keep your eyes peeled for all their antics."