I've used Skype. It's interesting software, but not ready for primetime until they get better quality of the connection. It's probably inadequate server power or bandwith into their servers, but conversations on Skype can be nearly unintelligble at times, and the lag is quite noticeable.
But, as with everything in this industry, it will change. It's certainly got potential.
Yeah i guess it all depends on the bandwidth. I've had regular calls to the UK and Australia that sounded great! But like you said it's the equipment and bandwidth.
I've been using Skype within the USA for a few weeks for PC-to-PC calling. The quality is unbelievably good (far better than telco service, and as good as face-to-face), lag time is unnoticeable and connections rock-solid so far. And, at free, the price is right. Haven't tried international or dialing outside the Internet yet.
I'm happy.