You can only add ranks into a skill equal to your character level.
This bonus goes above and beyond that.
Say you're a 5th-level rogue with 10 intelligence. You can max out 8 skills with 5 ranks each. Alternatively, you could add in your favored class bonus to skills and max out 9 skills rather than 8, however the max is still 5.
Now, if I chose this new favored class option AND put ranks into Bluff and/or Diplomacy, suddenly I go from a +10 modifier (5 ranks, 3 class skill, 2 Charisma) to a +10 modifier (+12 to feint/gather information).
My total modifier is higher in the given situations. At higher levels, it becomes even more pronounced. A normal rogue could have around +33 bluff at level 20 (20 ranks, 7 Charisma, 3 class skill, 3 circlet of persuasion), but a similar rogue with this option could feint with a +43 modifier! Even balors and dragons fall for it!
Same rogue could gather information with a +43 modifier, enough to learn about the deepest secrets of reality.
That isolated demiplane where the lich hides his phylactery that can only be accessed by plane shift and similar powerful magic PROVIDED you know about it? You just got the lich to freakin' TELL YOU bout its existence and about all his safe guards!
While I agree with the rules summary, the bonus to diplomacy wouldn't make a lich tell you his secrets. Might let you 'gather info' from a wizard school or something, but not a single individual.
Although I wish it worked like that.
"You there! Peasant! I am gathering information about your secret potato stash. I know you need it to live, but tell me where it is anyway!"
Of course, if the peasant said no, this bonus would help you with your roll to say "Look behind you! A giant potato!" and then stab him :p
While I agree with the rules summary, the bonus to diplomacy wouldn't make a lich tell you his secrets. Might let you 'gather info' from a wizard school or something, but not a single individual.
I was exaggerating, kind of like when someone says "that guy could sell ice to Eskimos."