from what i gather, it only involves strength and either weapon or creature damage values. NPCs and creatures that act like NPCs use whatever weapon is equiped for damage (and disregards the creature damage), and then multiplied by strength modifier, which is +1% per point of strength above 50, -1% below 50. so 100 strength is 50% more damage of the weapon; 150 strength is 100% more. skills only affect hit chance.
creature damage i think is the same at least when i test it for creatures without weapon capability. combat values replace skills, sort of. it's like having that value for all skills under that catagory. for for creatures, combat is for melee and athletics, stealth is for ranged attacks and critical hits, and magic is for spells.