Leather Hide can be gathered by having a Skinning Knife in your backpack, and then right-clicking a corpse and selecting Harvest.
Unlike most tools, you should not "Use" the Skinning Knife on the corpse or equip it - it just needs to be in your backpack for the Harvest option to appear when right-clicking the corpse.
Cutting to Leather[edit | edit source]
To turn Leather Hide into Leather, use Scissors (double-click them) and target the Leather Hides. You will produce 2 Leather for every 1 Leather Hide in the pile.