Rosweed, I feel for you. Not that this is correct or only answer, but here is my little offering.
My daughter's Acer 5810T was just upgraded to Windows 7 on a clean install. After installing Skype 5.5, the dang thing would consume most of the computer's resources and send it into freeze mode for 10 minutes or so. This would happen everytime she tried to have a video chat. After much trial and error, since there didn't seem to be a viable answer for her problem on the net or from our local computer geeks, I updated the bios, the chipset and the video camera software, (although I don't think camera softeware made a difference). While Skype continues to use 50 to 80% of the computers resources as compared to 80 to 100% before, we seem to have made some improvement through the aforementioned updates.
I should mention, since it's only been a few hours since the updates, should the freezing return, as one geek suggested, we sadly, will have to return to vista.
Ever since I installed Windows 7, my outgoing and incoming Skype videos look like this. Any suggestions?
Most likely you have an nVidia graphic card and have installed the latest 285 version driver. Skype is not working well with this driver. The solution is to revert to the older 280.26 driver.