Set Up - also see Screencasts at bottom of page

For USB mic:

1) Plug the microphone and headphones in, then launch Nicecast and Skype.

2) In Nicecast's Source drawer, set the first pop-up to
Audio Device and then select your microphone for the Input Source. This
should be the same device selected in Skype's Audio preferences for
Input.
3) Next, open the Effects window, and insert the Application Mixer plugin.

4) You need to adjust the Application Mixer's settings, in
the Editor window. Set Skype as the Application, and leave the
Crossfade at 50%. Click Advanced... and set it to Hijack One Audio Stream (Default). This must not be set to MegaMix, or your audio will come through twice causing major echo.

5) Finally, press the Start Broadcast button in Nicecast.  Audio from your microphone will be broadcast. When you
click Hijack in the Application Mixer plugin, audio from Skype will
also be brought in.

The audio from your microphone
is going two places, into Skype and also into Nicecast. In Skype, this
audio is sent to the person to whom you're speaking. In Nicecast, this
audio is mixed with the audio pulled from Skype, specifically the other
speaker's portion of the conversation. This is combined together to make one audio stream of the conversation.

Broadcasting

Now that you are set as described above, you should  hear both sides of the conversation and be set to go.  Speak
using the microphone, and accept calls through Skype or start a conference call in Skype and add as many as your Skype version or computer can handle. You can also play
any audio that is in iTunes, and grab that with a second instance of
the Application Mixer plugin. 

For USB headsets:

1) Plug the headsets in, then launch Nicecast and Skype.

2) In Nicecast's Source drawer, set the first pop-up to Application and then select Skype.
3) Next, click on Advanced.
4) You need to select MegaMix in the Advanced window, not Hijack One Audio Stream
5) Finally, press the Start Broadcast button in Nicecast.  Audio from your headset will be broadcast. 

Broadcasting

Now that you are set as described above, you should hear both sides
of the conversation and be set to go.  Speak
using the headset's microphone, and accept calls through Skype or start a
conference call in Skype and add as many as your Skype version or
computer can handle.

Relevant Screencasts:

• Basic Streaming with Nicecast and a USB Headset

• Basic Streaming with Nicecast and a USB Mic

• Skype Preferences in Mac