Why Do Some Leathers Smell Good, While Others Smell Like Toxic Chemicals?

It depends on how the leather is tanned, processed, dyed and finished. The chemicals used to produce some leather goods are more toxic than others. Here's a detailed description of the leather tanning process from the Environmental Protection Agency: http://www3.epa.gov/ttnchie1/ap42/ch09/final/c9s15.pdf

The EPA .pdf lists some of the chemicals used, and says:

"Tanning is essentially the reaction of collagen fibers in the hide with tannins, chromium, alum, or other chemical agents. The most common tanning agents used in the U. S. are trivalent chromium and vegetable tannins extracted from specific tree barks. Alum, syntans (man-made chemicals), formaldehyde, glutaraldehyde, and heavy oils are other tanning agents.

"Heavy leathers and sole leathers are produced by the vegetable tanning process, the oldest of any process in use in the leather tanning industry."

In addition to:
trivalent chromium
vegetable tannins
alum
syntans 
formaldehyde
glutaraldehyde
heavy oils
the article also mentions:

calcium hydroxide

ammonium salt

proteolytic

chromium sulfate

wax

shellack

pigments

dyes

resins 

urethane

solvent-based finishes

By the way, "VOC" stands for volatile organic compound. Even though we may be used to thinking of "organic" as being something healthy, "organic" has a different meaning in a chemistry context. And volatile organic compounds (VOCs) are not only unhealthy, they are easily breathed in. 

And the article concludes with:

"There are several potential sources of air emissions in the leather tanning and finishing industry. Emissions of VOC may occur during finishing processes, if organic solvents are used, and during other processes, such as fatliquoring and drying. If organic degreasing solvents are used during soaking in suede leather manufacture, these VOC may also evaporate to the atmosphere. Many tanneries are implementing water-based coatings to reduce VOC emissions. Control devices, such as thermal oxidizers, are used less frequently to reduce VOC emissions. Ammonia emissions may occur during some of the wet processing steps, such as deliming and unhairing, or during drying if ammonia is used to aid dye penetration during coloring. Emissions of sulfides may occur during liming/unhairing and subsequent processes. Also, alkaline sulfides in tannery wastewater can be converted to hydrogen sulfide if the pH is less than 8.0, resulting in release of this gas. Particulate emissions may occur during shaving, drying, and buffing; they are controlled by dust collectors or scrubbers.

"Chromium emissions may occur from chromate reduction, handling of basic chromic sulfate powder, and from the buffing process. No air emissions of chromium occur during soaking or drying. At plants that purchase chromic sulfate in powder form, dust containing trivalent chromium may be emitted during storage, handling, and mixing of the dry chromic sulfate. The buffing operation also releases particulates, which may contain chromium. Leather tanning facilities, however, have not been viewed as sources of chromium emissions by the States in which they are located.

References cited in the article include:

K. Bienkiewicz, Physical Chemistry Of Leathermaking, Krieger Publishing Co., Malabar, FL, 1983.

Development Document For Effluent Limitations Guidelines And Standards For The Leather Tanning And Finishing Point Source Category, EPA-440/1-82-016, U. S. Environmental Protection Agency, Research Triangle Park, NC, November, 1982.

1992 Census Of Manufactures, U. S. Department of Commerce, Bureau of Census, Washington, DC, April 1995.

Telecon, A. Marshall, Midwest Research Institute, with F. Rutland, Environmental Consultant, Leather Industries of America, August 7, 1996.

1996 Membership Directory, Leather Industries of America Inc.

M. T. Roberts and D. Etherington, Bookbinding And The Conservation Of Books, A Dictionary Of Descriptive Terminology.

T. C. Thorstensen, Practical Leather Technology, 4th Ed., Krieger Publishing Co., Malabar, FL, 1993.

Locating And Estimating Air Emissions From Sources Of Chromium, EPA-450/4-84-007g, U. S. Environmental Protection Agency, Research Triangle Park, NC, July 1984.