Can anyone tell me themes are better or CSS style sheets are better in asp.net for design?
Please explain the concept also with an example.
You should combine them. Use your css files in the theme folder for your normal styling of all the html elements in your website (include all the generated elements).
In the skin file of a control, you can set the default css class. Other properties like the layout and default behaviour of the elements (sample: calender control) are editable here too.
Skin files are good for all layout specific configuration you can't easily do with css, but with the .net properties of the controls.