
Skype is encrypted according to their website using the AES standard:
Taken from the Skype Privacy FAQ
Is Skype secure?
Yes. When you call another Skype user your call is encrypted with strong encryption algorithms ensuring you privacy. In some cases your Skype communication may be routed via other users in the peer-to-peer network. Skype encryption protects you from potential eavesdropping from malicious users.
Why are Skype calls encrypted?
Skype is encrypted end-to-end because it uses the public Internet to transport your voice calls and text messages and sometimes these calls are routed through other peers. Skype encryption ensures that no other party can eavesdrop on your call or read your instant messages.
What type of encryption is used?
Skype uses AES (Advanced Encryption Standard) – also known as Rijndael – which is also used by U.S. Government organizations to protect sensitive, information. Skype uses 256-bit encryption, which has a total of 1.1 x 1077 possible keys, in order to actively encrypt the data in each Skype call or instant message. Skype uses 1024 bit RSA to negotiate symmetric AES keys. User public keys are certified by the Skype server at login using 1536 or 2048
Yes. When you call -bit RSA certificates.
However, this is creating an interesting debate in the US about surveillance of these type of internet based calls. Since they are so strongly encrypted, they can pose a significant challenge for law enforcement authorities to attempt to monitor.
Read more at ARS-Technica
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