I figured out how to make the video work on the Droid Razr. First open your camera like your going to take a picture. Then switch it to video mode then switch it to the camera facing you (screen side) then close out of camera mode (return to home) leaving video set as I just described, now run the Skype app and do a test call.
After testing I find that it now works even if the camera is set to picture mode. Possibly Skype remembers the setting? Or has Skype pushed out an upgrade to the app? Any how it now works great on my Razr where just the other day I could get no video out of the Razr back to my PC.