What causes this? Is it to do with decay or is it to do with substances within the bog dying the skin?
The anaerobic decomposition of moss produces tannins in the peat.
The bog water interacts with the acids in the moss and produce tannin and other chemicals that preserve the bodies that fall or are cast into the bog; hence the numerous well-preserved bog bodies. http://www.digitalmedievalist.com/opinionated-celtic-faqs/bog-bodies/
The tannins tan the bodies just like tanning leather; the color of the bodies darken and the tanning action also preserves them.