Please check to make sure that the computer's audio input is set to be the Built-In Microphone. To do that, go to System Preferences -> Sound -> Input and make sure the Internal Microphone is selected (not the Line-In). Does the volume indicator on that settings page show that the microphone is picking up sounds when you make noise close to the computer?
When you're zoomed into the camera in iCam on your iPhone, try changing the volume using the iPhone volume buttons. Does it say "ringer" in the volume indicator pop-up?