It is amazing that MS and Skype cannot fix this problem
it has been going on for months and still no resolution
windows 8 camera works
skype webcam says - "other application is blocking use - etc"
still the same - for months now
Which version of Skype do you use?
Run Skype >> WinKey + C >> Settings >> About.
Please update to Version 220.127.116.11
Run Skype >> Win + C >> Settings >> Permissions
Webcam and microphone >> move the slider to On.
Please close Camera App before using Skype because Skype cannot use the camera if some other application is using it. Close Camera App by dragging it from top to bottom. I hope this helps.