(Not that it matters since I also find it very badly implemented + I couldn't care less for realism - just out of curiosity) what do you find so unrealistic about it?
Well, at its most basic - I believe human beings (or whatever race, assuming a relatively plausible universe) are incapable of mastering every single skill in a given world. You're either a specialist or a "jack-of-all-trades" - but you can't be the best at everything.
In the Elderscrolls games, you can - if you're patient enough - master every single skill, because there's no decay.
That's not only highly unrealistic, it's also incredibly detrimental to replayability - because there's really no incentive to start over - as you could simply max everything. It's made even worse in Oblivion, because you can "beat" all guilds, regardless of skill levels.
I know progress is slower for minor skills and what not, but as I recall - every ES game allowed maxing of every skill.
Beyond that, they've all had the "feature" that using a skill is enough to make it increase to max, but they forget to take into account WHAT you're using it for. So, you could potentially become the best fighter in the world by hitting mudcrabs over and over. Sure, progress is slowed with some skills (IIRC?) - but it's still what people tend to do, to develop their skills. The game needs to challenge you - and it needs to require you to defeat increasingly tough challenges to actually improve.
The same is true for any skill, and stealth - at least in Oblivion - can be maxed by simply sitting in a dark corner for a long time, whilst low-level NPCs walk around close by.
Things of that nature, defeats the entire purpose of having a use-based skill system, because I assume the "realistic" nature of such a system is why it's used in the first place. If it's for flexibility, that's silly - because there's nothing inherently more flexible about it, it's just a much easier way of designing mechanics. Translation = a very lazy design.
It certainly fits my theory about Bethesda - because every single game mechanic that I can think of, is implemented in the most lazy fashion imaginable. From "design your own spell", to full-on level scaling. Sure, it's flexible - because the player does all the work, and they just make the most basic components to build from.
They even managed to ruin the excellent Fallout SPECIAL system, by making it simpler and they made 100% in pretty much all key skills possible for a single character.
They simply don't understand game design.