This is similar to the leather skin thing, http://en.wikipedia.org/wiki/Hard_body_training
This is used to be able to give and recieve harder attacks. This can also be used to toughen skin. Bruce Lee would thrust his hands into barrells of gravel to make his hands tougher.also strenghthening of muscles can help absorb blows. Muscles create a shell to protect the bones.
\ also the more pain you recieve the more pain you can withstand. it is much the same as building up tolerance to a drug.
That's what I discussed earlier, bones getting stronger, so not related to skin (of course you can grow calluses on top of skin, even just by playing guitar, but it's nothing too special).
But just to answer more conclusively the original post and skip over any new-age myths, the answer is that if you are doing martial arts you should mostly worry about first dodging hits, and then if you really have to take hits there are ways to lear to minimize the damage from the impact mostly from partially dodging or contracting, relaxing and moving your muscles at the right times in response to a hit.
But again dodging is much more important because even minimizing impact is not ideal, there can still be very serious cumulative damage you can do to various soft tissues, so for example there is no such thing as a "leather brain" or "iron brain", and you can see the damage that can show up years laters in professional boxers like C.Clay/M.Ali. Thinking that whatever doesn't kill you makes you stronger is wrong, because there are plenty of things that will not kill you but will leave you crippled for life.