I have an iq526, and it works within the HP provided software on my Vista Home Premium 64 OS. It uses the following 2 drivers, " C:\windows\system32\ksthunk.sys, and (same path)- usbvideo.sys. You should go to your Device Manager, click on "Imaging Devices" and check the driver details to be sure that you have these drivers. If you do, then some other program may be blocking the use of the webcam when you are using the program. A good place to check if your webcam won't run in your selected app is to completely close Windows Media Center, it uses the webcam even when you are not currently using it, and prevents other apps from using it. Try that first, and see if it helps. You may have to close it from the Task Manager, as I'm really not a webcam user, so if you know a more surgical way of shutting down the WMC controls to the webcam, use that method so you don't have to restart the WMC when you want to watch TV or something non-productive like that. What I am pretty sure of is that the WMC is hi-jacking your webcam control from any other apps that want to use it.
Dave

I can't say for sure what is using your webcam, Vista takes charge of a lot of files and directories that I used to have no problem accessing on the local machine in XP. I have had to do a lot of permission work with this machine to get files accessible the way I want them to be.
Just to be sure it does work, check to see that you have the application in your "All Programs" menu. Click Start, click on All Programs, scroll down to and click on HP, then click the HP TouchSmart folder icon, and the HP TouchSmart Webcam app should be there. Click on it, and see if it opens. Beyond that, I'm not sure why it doesn't work for you in Skype, although it may be a Skype issue. Sorry I couldn't be more helpful, my internet is satellite, and Skype is just not going to work with 800-900 ms latency, so my webcam is a novelty item.
Dave

My Webcam will not work with Skype or anything else. Have Windows 7 64 Bit and HP TouchSmart 600.
Techs have played with it by remote control... could not fix. Other techs have made house calls twice replacing camera and cable... still does not work.

Now told must send computer back... it is less than 6 months old.
The first HP 600 sent when I bout the PC would not even turn on out of the box.

HP seems oblivious and incompetent to handle these problems. Even though Google would support that there are a lot of us having very similar problems.
My suggestion is don't buy another HP product. Don't think I will.