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This FAQ is for the Windows Mobile application, which is no longer available for download. For help with Skype for Windows Phone, please refer to these FAQs.
Either use a headset, or adjust the microphone settings on your device. You can do this on touch screen devices by going to Start > Settings and tapping on the System tab. Options vary between devices, but there should be an icon on this tab that you can use to adjust audio settings.
Please note that Skype for Windows Mobile is no longer available for download.