Sky Stones are called such as the metal is smelted from ore found in 'stones' that fell from the 'sky', in other words, meteors. Obviously it can't be any old meteor that carries this specific ore, so they all have to come from the same source.

The last sky stone fell several centuries ago, at least prior to the 500th year of antiquity, landing in Tarkas which was--at the time--the Skrel'eth homeland. It is from them the name 'sky stone' comes, and what sketchy accounts of the names meaning. Though swamped by religious influences many believe that sky stone is a gift/warning from the Gods.

The metal itself, has the following main attributes:

1) It is an especially lustrous silver colour, and while it doesn't directly glow, after exposure to an appreciable light source sky-stone will emit a persistent if sometimes low level of light for some time. Often this would be a method for testing claims that something was made of, or at least contained traces of sky-stone. Exposure to day light or lamp light, then quickly moving the blade into deep shade or a dark room to see if there is any trace of luminosity.
2) Sky stone has an unparalleled resistance to being damaged, even a thin plate of sky stone could turn arrows for example.
3) It can hold an edge very well, it's not especially well known for it, but is among one of the best metals for it. The Blade of Lannen's edge is not so much from the sky stone it's made of but from crafting techniques and magic involved in its creation.
4) An exceptionally high melting temperature, in the realms of 2,000 degrees Celsius.

Until the humans discovered the ore, the resource of sky stone had remained entirely untouched by the Skrel'eth, due in whole to the impossibly high melting point. Smiths simply couldn't smelt the ore to produce the precious metal. It was this that originally perked Humans interests in the ore. Over many years and allot of research, Human finally discovered a way to combine science and magic to produce vast furnaces which could generate the heat necessary to smelt sky stone ore, driven by their natural curiosity (heightened by the idea that this was some sort of puzzle set for them by the Gods, believed to have delivered the sky stone to Aagos, and that unlocking it would yield great rewards.)

Given the metals qualities it would likely have become very widely used, save for two drawbacks:

a) the effort required to smelt the ore and also the fact that metal needed to be kept at very high temperatures in order to be worked, and
b) the simple fact that this metal was not native to Aagos, and that only a small amount was known to exist. Though small amounts were found from time to time, the next big discovery happened in the high mountains of Urgat, where several more sky stones were found to have fallen, and later a small amount in Sron.

So, as a result sky stone items are exceptionally rare, owned by the most powerful and influential people in the world.

Sky stone post darkness is even more rare than it was previously. When fleeing for their lives even precious sky stone was often left behind in favour of survival (though not always the case.) Besides, moving the metal across the often large distances to get to Telantha was impossible, so much still remains hidden behind hoards of demons.