Have you checked your recording settings at Control Panel->Hardware and Sound->Sound->Manage audio Devices?
Does your microphone show up there?
Is it selected as default (or rather the line-in)?
Isn't it disabled?
If you go into Skype, Tools menu, Options, Audio Settings, does your microphone's name appear in the drop down, does the adjustment bar goes green if you make noise in front of the microphone?
This pretty much sums it up, by the way:https://support.skype.com/en-us/faq/FA10330/Sound-guide-Windows-7
(You have Windows 7, don't you?)