(1) SET UP AUDACITY
Get Audacity from audacity.sourceforge.net; Run Audacity; Go to File -> Preferences -> Digital I/O -> Recording and choose a “Digital Audio”-class device rather than an “Input”-class device (which will replace microphone input with combined microphone **and** speaker recording); choose to record two channels of stereo; finally, close Preferences, and choose “Wave Out Mix” as the source of signal on the main window of Audacity;
(2) SET UP THE SOUND DRIVER
Go to Control Panel -> Sounds and Audio Devices -> Volume -> Advanced and make sure the microphone is not muted; you may also want to click on “Advanced” settings for the microphone and check “MIC Boost” to amplify your voice.
(3) USE AUDACITY AND SKYPE
During a conversation, you can start recording in Audacity at any point (big red button); Audacity allows to export recordings in WAV, MP3, and OGG formats; for MP3s, you will need to find lame_enc.dll on Google (LAME is an excellent MP3 encoder).