From their site..There may be problems with getting sound from Adobe Flash v. 9 and earlier, Wine and Skype when these applications use the ALSA protocol. The sound is supposed to go through the "pulse" plugin in ALSA, that passes it to PulseAudio, where it get mixed with all other sound, and passed on to a audio interface. The problems seems to be related to the pulse plugin in ALSA, and the special ways these apps uses ALSA. "

How do Ubuntu decide this is a good idea for their distro's??

Nothing it advertises is really of any use to the average desktop user and just adds more bugs to the chain, ALSA can already mix multiple streams (multiplexing)

Again, from their site "PulseAudio is a sound server for POSIX and Win32 systems. A sound server is basically a proxy for your sound applications. It allows you to do advanced operations on your sound data as it passes between your application and your hardware. Things like transferring the audio to a different machine, changing the sample format or channel count and mixing several sounds into one are easily achieved using a sound server."

none of the above is of any real benefit to the average desktop user.

Heres how to get back on track

1. apt-get remove pulseaudio
2. remove all the .asoundrc's in your home dirs
3. set your skype audio output to the original hardware driver names,. not pulse etc.
4. Lock in your CPU freq to 1.6ghz any slower and you'll get weird distortion
5. Check any ALSA related configs in /etc dont have references to the pulse driver

Additionally, from the pulseaudio removal guide

PulseAudio Removal

If you decide you no longer like PulseAudio and would like to disable it: Remove the added lines to /etc/asound.conf If /etc/asound.conf did not exist when you installed PulseAudio, you may remove /etc/asound.conf entirely.

After this, you may remove all of the installed PulseAudio packages.

To disable pulseaudio in hardy you need to select alsa for for all options in /system/preferences/sound