Monarch caterpillars molt (shed their skin) five times throughout their larval stage. The "skin" that is left behind is actually the caterpillar's exoskeleton. An insect's skeleton is on the outside, as opposed to on the instead like mammals, fish, reptiles, amphibians and birds. Endoskeletons provide support inside the body in the form of bones and cartilage, whereas As caterpillars grow, their exoskeleton gets too tight, so they need to shed it in order to continue to grow. Each molt results in a new "instar" stage. Therefore, when the egg hatches, that tiny 2 mm caterpillar is in its first instar stage.
It will molt three more times and grow exponentially over a couple of weeks. Each stage lasts 3-5 days. The fifth and final molt is when the fifth instar caterpillar becomes a chrysalis.
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USDA Plants Database