Q: isight camera does work with skype.

(1) In general, to troubleshoot iSight itself: http://support.apple.com/kb/HT2090

Be sure to check more than one Apple camera app (perhaps iMovie, too) in more than one user account.

(2) If your iSight works with your iChat Apple app but not Skype in every user account you test, the problem must be ONLY with your Skype.  The first thing to try is restarting Mac and testing with ONLY Skype running.  If that does not help, repair permissions and retest.

(3) If the problem continues, the best help for Skype-specific problems should come from Help for Skype – user guides, FAQs, customer support. 

Skype even offers its own dedicated Mac - Skype Community.  To save time, you can search there for existing answers to your specific question or post your question there and wait for help from Skype for Mac users who post there. 

If all else fails, you can even Sign in to your Skype account to get help directly from Skype technical support.

(4) If you find that you need to reinstall Skype, try clicking this download and reinstsll the latest Skype version compatible with your Mac OS X (10.5.8) computer.  If a compatible version is not available at this current  Skype download site, and if you did not save a backup of the old Skype version that works with your Mac OS 10.5.8, you may be able to get what you need from Old Version of Skype for Mac OS X 10.5 Leopard (PowerPC) Download.