If they dont have any credits on their LFS account, then they can see only 512x512 versions of your skin online. You get best possible quality (for yourself online) by few simple steps.
1 - Lets assume you have some kind of car skin, you need to upload 1024x1024 version of it online.
2 - Delete your 1024 version from your skins folder and save 2048x2048 (or higher) version in the skins folder.
3 - Rename the 2048 (or higher) version to the 1024 version, you will be able to use your high res skin online, however others will still see the 512x512 version if they dont have any credits on their account.
If other LFS'sers do have some money on their account, they have the option to download 1024x1024 skins online, thus they cant get better quality, because you can upload only 1024x1024 skins on LFSworld.