So moon sugar and skooma have a relationship similar to that of coke and crack? (Seriously: Moon Sugar??)
Yeah, it's made/grown/manufactured in Elsweyr, and the Khajiit have an inborn NEED for it. To other races, it's pretty dangerous but Khajiit take it everyday. Illegal in the Empire, it is mixed with another ingredient(s) and turned into the drug known as Skooma.
So basically-Moon Sugar+?(s)=Skooma
You can probably find more info on Moon Sugar and Skooma on the UESP