The first thing you should probably do is bounce the app and get the "Skype For Windows Desktops" version from here
http://www.skype.com/en/download-skype/skype-for-windows/downloading/
and install that and then use the menu bar->tools->options->video settings
and see what's what.
Still does not show my webcam a possible selection. Actually, noting there at all.
I had done that yesterday and again today, most recently a few moments ago. When I look at the menu settings, at the top of the screen it correctly identifies my webcam ( Logitech c260 ) but in he box where I should see my picture It is always black with a circle going round and round. External programs display pictures and video's fine although sometimes jerky on video motion.
I really appreciate all of your help.
Michael
Update......... Now I'm really confused. I hooked up a old USB 1.1 hub between the webcam and my computer because I wondered if the USB port needed more power and low and behold the video now works even though as I understand the webcam is supposed to be a 2.0 USB devise. It even tells me when I plug the webcam in that I am plugging it into a 1.1 hub and that it may severely impact the devises performance. It is also strange that the jerkiness noted in other video capture programs is now gone.
I plugged it in again directly to the computer and no video again and the jerkiness is back in other applications is back. I put the old hub back and it is staying till I get a new one.
Michael