Microphone pointing at speakers, causing feedback ??

Faulty speakers ?

If all else fails, re-boot

Unplugged microphone, tried different speakers, rebooted - didnt help.
I talk on skype all the time and havent had this issue.

Did you try a reboot?..................

Did you try completely uninstalling and re-installing? Make sure you choose
the option that removes all config files.

is the sound coming through a soundcard or off the m/board.
if its through a soundcard try another soundcard .
if its through m/board probably oops coming through mboard you could put in a
soundcard.

I was just sitting thinking this sounds like an equalizer issue.
Its not the speakers as its equal coming out of both sides.
So I was looking around for something that I missed and
I noticed under Sound Preferences - my Internal Audio
device Profile is Analog Surround 4.1 Output + Analog
Stereo Input. That should be 5.1 Output and sure
enough, fixed! Now, how the heck it got changed is
another story.

Good you got it sorted !! Just changing to a different hardware output
scheme shouldn't have caused that problem though. Yes it can mess up
the sound output if it's wrong but usually just kills it. If you are
feeling brave you can try reverting to the 4.1 scheme and see if the
problem is repeatable

. Yup. Repeatable.... but..
Its not the scretch but a distortion now.