There are two ways to get to the Volume Controls in
Windows 95/98
This also works with Windows 2000. The Idea is the same
using XP. The only real difference is the placement of the Volume Controls.
1. Double clicking on the little yellow speaker icon in the Task Tray ( down by the clock )

2. By Way of the Start Menu

In XP: The Accessories is under ALL PROGRAMS.
When you open the Volume Controls you will see a window
like this one ( Of course it wont be EXACTLY like this )
Notice the check mark in the Microphone setting... it
is there so you won't hear your own voice through the speakers\headphones
when you talk or cause feedback. These settings are for PLAYBACK there
are different controls for RECORDING.
To get to the RECORDING settings Click on the Options menu and choose Properties as seen below
Another box will pop up looking something like the one
below.
Notice that under "Adjust volume for" that Playback is
selected.
Change this to "Recording".
Next, in the lower panel put a check mark by the
"Mixed Output" or whatever is similar on YOUR computer ( Maybe Auxiliary
or Sum).
This is showing the volume controls for the CD, Microphone and the Mixed Output. The check marks now mean that the one "Selected" is what the computer will use as Input. So if you have "Mixed" checked, or maybe "Wave" or "What You Hear", these are different selections that might be available in YOUR sound card's Mixer, Then the computer will basically "listen" for something to process or play.

These are screen shots of the two different Sound Mixer Controls that
I have.
Note that the one on the Left, Windows mixer, that the Mic is selected
and it has a Mixed Output.
The one on the Right, Creative's Audigy LS mixer, has "What You Hear"
selected as the recording source.
This one is a lot easier because it has both recording and playback
volumes on the same window.
This is how I play music in the voice chat rooms by Selecting the "Mixed Output" or "Wave" or maybe "What You Hear" outputs and using the "Hands Free" option in the voice chat and then pressing PLAY on Winamp or any other player you like. I use Winamp ( shown below )