I heard some developers use models instead of levels.
How does that work? I usally make my levels with wed but I know that models are around 5 times faster in rendereing.
which tools can you recommend for this? and how does the skinning work, because models are not uv mapped by default.

You understood that wrong!
They use Levels, but they build it with models, instead of blocks. So you make a model in MED, and then you put it with WED into you level.

MFG Dark_samurai