Had this problem on iPhone 4 for 2 days: callers or people I call cannot hear me. I can hear them clearly. Multiple restarts & hard resets: no joy. Tried turning off 3G: no joy. I thought it was a network problem until I did a search.
As described above, except Skype couldn’t “hear” me either when trying Echo123. Tapping gently on the table worked for 2-3 seconds only.
With Telstra Australia. At least some of my friends (callers and callees) are with Telstra as well, but don’t know about all of them. Tried iPhone-provided earphones, same symptoms. Device otherwise working well: speakers OK, games OK. Unrelated to the mute button, since I tried the headset, and also tried “talking into the phone like it was a slice of pizza” -- i.e. face not close to the screen.
*Resolved with a restore, and restore from backup, thank goodness.* iTunes 10.0.1, Mac OS X 10.6.4. iOS 4.1
NB: recently installed a Telstra network update through iTunes. Also applied a Speck Fitted Case recently. I think those are red herrings. Also have a iPhone 3GS with iOS 4.1 on same network which is working OK.