For some reason skype makes a mess of the signal that the webcam sends through.
The workaround is to get gstreamer to watch the webcam and then to output the video to a virtual device. Skype then gets its video stream from this new virutal device.
Install the Dependancies
apt-get install subversion build-essential libgstreamer0.10-dev
Get the source for gstfakevideo
svn checkout http://gstfakevideo.googlecode.com/svn/trunk/ gstfakevideo-read-only
Compile and Install gstfakevideo
Move the real webcam device out of the way
sudo mv /dev/video0 /dev/video1
Start skype via gstfakevideo
gstfakevideo v4l2src device=/dev/video1
Thats all there is to it, skype will now see clear video froun your logitech quickcam connect on linux.