It's a bit different now, demo racers do use the skin download system. They just can't upload skins.
So, if you are a demo racer and want people to see your skin online, it's best just to use the skins that come with LFS, or a skin you find that is free for use, and HAS been uploaded to LFS World by someone else.
Alternatively, if you like the demo, buy an S1 or S2 license, you can then create skins and upload them to LFS World - then everyone can see your personal skin online.