I have checked volume control and everything is fine, microphone is checked etc. I have tried adjusting the volumes of balance, wave, SW Synth etc but didn't get much out of it. I have also tried doing the test hardware thing under Control Panal's Sound Speech and Audio Devices and that didn't fix the problem.
Oh, and I use Intel® Integrated Audio as my default sound playback/recording device, thought that might be important info.
Any help is appreciated.