From my own experience:
1) make sure you hear microphone at all - without Skype;
2) make sure no ALSA/JACKD application is running - in my case 'ams' + 'alsaplayer' + 'jackd'
caused the problem;
3) make sure OSS emulation is configured properly.
Regarding the later - with SB Live 5.1 everything worked for my automagically
(when ALSA + JACKD were not involved), but it doesn't work for me with
M-Audio Revolution 7.1.