Firstly, the skeleton that you've made looks fine from the front, I can only assume that it's ok around the smaller joints too (hands etc.).
Regarding the deformation that you're getting, I'm not exactly sure which joints that we're looking at in your image but I think that it's the elbow and waist, it looks as though you've bound the limbs above and below the joint.
Using the elbow as an example...
You have bound the upper arm, the elbow sphere and the forearm to the elbow joint on the rig. You only need to bind the elbow sphere and the forearm to your rig. It works in very much the same way as parenting the geometry (as Neostrider sugested), but as it's bound to the skeleton you can use IK also.
Remember, you need to bind each moving part seperately. In the image that I posted previously the red parts were selected and bound, then the blue, then the yellow Note that it's the rig joint, the geometry joint and the geometry that follows the joint that is selected each time. Work your way, in this fashion, through your robot and it'll be fine.
I hope that helps,