It took me quite a while to setup Skype properly on my system so here's a guide to help set it up.
I use VL 5.8 RC2 and my soundcard is a builit in Intel ICH5 but it will probably work elsewhere.
By default, skype uses the "default" device on alsa, this resulted in an error in alsa's dmix plugin. AFAIK, the proper device for recording is plug:hw, but skype doesn't support choosing devices. So we need to create a new ALSA device whose playback dev is "default" and capture that is "plug:hw". To do this, we put the following in /etc/asound.conf
We override this using skype_dsp_wrapper http://juljas.net/linux/skype/
Compile it with CFLAGS=-DHAVE_ALSA then put libskype_dsp_wrapper.so to the where skype is.
Then in your /usr/bin folder make a script named skype:
cd <path to skype folder>
HIJACKALSA=default ALSADEV=skype LD_PRELOAD=./libskype_dsp_hijacker.so:/lib/libdl.so.2 ./skype
And then you're done.