Bus 005 Device 003: ID 0ac8:0323 Z-Star Microelectronics Corp. Luxya WC-1200 USB 2.0 Webcam
I ran Skype and was video chatting in minutes. I had a quick play with my audio settings and for future reference. I set System > Preferences > Sound
Playback = Alsa, Audio Conferencing = Alsa (both), Default Mixer Tracks = Capture: Alsa PCM on front:0
To control the volume of the microphone double-click the volume control then File > Change Device and choose Capture: Alsa PCM on front:0. Too high a volume seems to not work on skype so keep it in the middle.
Update: There is a problem with this cam (and others) on Ubuntu 8.10 as that version uses V4L2 rather than V4L1. Solution is described here.