The skeleton to which you attach a skin using Physique can be a 3ds Max hierarchy, bones in a hierarchy, bones not in a hierarchy and splines. Physique deforms the skin based on the relative position of the bone or links in the hierarchy. Specifically, it uses the length of each link and the angle between two connected links; it can also use the scale of a link.
The skeleton hierarchy can also be a 3ds Max system object that defines a behavior as well as a hierarchy. Three kinds of objects that are especially useful with Physique:
You create both bones and bipeds using the Systems object category on the Create panel.
Bones are useful for facial animation, a face with moving lips for example, or for non-bipedal characters. Bipeds are the system of choice for humanoid and other bipedal characters.
Usually you create the Physique skin before you create the skeleton, because you must adapt the skeleton's dimensions to the dimensions of the skin, in order to optimize vertex assignment to the links in the hierarchy.