A lot of users like me had difficulty in getting my system mic to work with skype on ubuntu 10.04, after trying several option, i finally got a simple way to get it done. Below is the proceed:
Install Skype => sudo apt-get install skype
Install Pavucontrol => sudo apt-get install pavucontrol
Go to Applications > sound & Video > paulseaudio volume control
On the "input devices" tab by default both front left and front right will be on 100%, reduce the front right to 0% (note that both may be locked click the padlock button to unlock before reducing the front right). Then close the configuration
Launch skype and make sure to uncheck the “allow skype to automatically adjust my volume settings” under option > sound devices.
From terminal run gksudo gedit /etc/modprobe.d/alsa-base.conf
add "options snd-hda-intel model=hp-dv5 enable_msi=1" at the bottom of the page
Save. Close. Reboot. Check your levels in alsamixer by running alsamixer (ensure all are increased)
Hope this helps!