Yes, I've been doing it for quite some time now, and it works really well. Face-to-face is of course always preferable, but you can absolutely make it work. I sometimes tell people to move through the room a bit if I need to see posture etc, it's really not a problem. Might be though that it doesn't work equally well for all instruments.
It doesn't need to be Skype btw - Google+ and Facetime work equally well, although most people decide on Skype.
The slight delay has already been pointed out, but you can work your way around that as others said. It's also not always the case in an extreme way, it's really minute and depends on both people's set-up. You can't accompany (don't do that much anyway though) for that reason, so if you want to work with accompaniment, the student needs to have it on their end.
It is paramount that BOTH parties have fast Broadband, otherwise it can get a bit frustrating
I also take my own check-ups via Skype. That way, I still have access to top industry people whenever I need it. As others already said: Better Skype sessions with a good coach than face-to-face with someone who isn't that great, or doesn't teach advanced level.