This is a very good question. However, I do not know the answer. What I would suggest is to have the other person hold on while you switch from mic to stereo mix in Audacity, or put your mic so that it picks up speakers, but there has to be a better way than that.
Could someone explain how audacity can be used to record a skype
conversation which should receive input from the mic and from the internet?
I have heard of a shim that effectively grabs the audio (of the person on the other end)
directly from the soundcard. Is this true? Where do I get the shim?