I've been having problems with Skype since the upgrade from 8.04 to 8.10. It seems I got it to work:

[Adapted from: http://forum.skype.com/index.php?showtopic=231111 ]

My settings:
In Ubuntu's VOLUME CONTROL
DEVICE: HDA NVidia (Alsa Mixer)

In the "Options" Tab, both "Input Source" is set to "Mic"

In Skype:
In the "Sound Devices" Options menu:
Sound in: NVidia (hw:NVidia,0)
Sound out: Pulse
Ringing: Pulse

As for the video/webcam, I followed the instructions here:
http://ubuntuforums.org/showthread.php?s=1df51c0b50454c167962b4ef8c60b789&t=945803&page=2

PS: Sorry about not having more visuals. Kinda rushed this posting....