As the yeasts and mold grow on the outside of the cheese, they convert some of the protein in the cheese to ammonia. The ammonia soaks into the cheese. Because ammonia is very basic, this raises the pH of the cheese near the rind (makes it *less* acidic). This, in turn, makes the cheese runny.
It takes quite a long time for the ammonia to soak into the center of the cheese. At the same time, the yeasts and molds growing on the outside of the rind continue to produce ammonia. This is why the outside of the cheese gets very runny, while the center of the cheese is still solid. If you produce ammonia fast enough, you will get "skin slip". This means that you liquified the paste just below the rind so much that the rind will just slip off.
The key to making good bloomy rinds like a Robiola is to control the speed at which they mold on the outside is growing. Normally, you will want to age it at higher temps (10 - 20 C, depending on what you are doing) until you get full coverage of the yeasts and/olds. Then you move it to the normal fridge and continue to age it at 6 C. This slows down the growth of the yeasts/mold, slows down the production of ammonia and allows time for the ammonia to move to the center of the cheese. This lets the cheese have a consistent texture from the center to the outside.
Sometimes you *want* that difference in texture, though. Some producers will intentionally age their bloomy rinds at higher temps so that you get a soft runny exterior with a solid core. Remember that the ammonia increases the pH (lowers the acidity) of the paste. So if you age it at higher temps, you will end up with a camembert like exterior with a nice tart, fresh cheese interior. It just depends on what you want.
And, yes, some of that REALLY REALLY bad smell is ammonia. But these yeasts and molds produce a *lot* of pretty bad smells. "Farty broccoli" is how I usually describe some of my bloomy rinds. If the humidity is too high, then b. linens will grow and you will get "sweaty gym socks" smell. If that happens you really want to reduce the humidity.
But this all comes with experience. Just make a lot of cheese and you will get the hang of it. It's tempting to want all your cheeses (especially your first ones) to be perfect. But patience will be rewarded. Cheese making is a *deep* topic. There is a lot to learn and quite of lot of *that* can really only be taught by experience.
