When having a audio chat on skype on Parallel Desktop Windows 7 Virtual machine. micro-phone input has a lot of static/distorted. How to fix?

From Device Manager, try to uninstall the Parallel Sound Driver

Remember to check the “Delete driver software for this device” option, otherwise when we re-install driver, windows is going to use this faulty one again.

Scan for hardware change and let windows to search for a suitable driver.

Windows found another one which works better.

The other thing to note is that now the “Automatically adjust microphone settings” option in Skype audio chat does not work. Just uncheck it and set at a level that works best for you.