It is not a major issue as such if other applications can display video camera. When Skype fails to display its webcam and giving the error, 'it is not in use or there is no webcam device available in your system', it becomes clear something is wrong somewhere. Trying it in yahoo messenger or live Messenger works without any error message.
You have probably tried every information at your disposal to find solution without any result. There is a time when you uninstall and re-install the Skype application and clean your registry still without a fix. There is need to look further than that why the camera cannot communicate with Skype. This step requires painstaking approach that includes uninstall of most toolbars and unnecessary applications at your Control Panel. These include any application you are suspicious to be of malicious intent.
Before doing anything there is need to scan the system for malicious software by using the most effective means of eliminating malicious software from a system.
If you are facing this problem of webcam refusing to display on Skype while it works perfectly well in other application, this step-by-step information is meant for.
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SEPT 1: Scan your system for malicious software. To do that visit this LINK.
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STEP 2: Go to your 'Programs and Feature' at the 'Control Panel' to Uninstall all toolbars and unnecessary applications before the problem occured.
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STEP 3: Clean your system with Ccleaner. Google on Ccleaner and download it from a trusted site.
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STEP 4: Press Windows + R keys to open 'Run'.
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STEP 5: Type or copy and paste devmgmt.msc into 'Run' and click 'OK' to continue.
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STEP 6: Click 'Imaging devices' to expand it.
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STEP 7: Right-click on the camera device, click 'Uninstall' and 'OK' to uninstall it.
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STEP 8: Click on the 'Scan for hardware changes' tab(the icon with a lens)for the system to reinstall the device driver. **If it doesn't install automatically download the camera driver from your system maker official site and install it**.
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STEP 9: Sign into your Skype and test your webcam.