[tip o' the hat to Digital Freedom Campaign] Jeremy Reimer writes on ArsTechnica that the Bavarian government sought assistance from software vendor Digitask in snooping on Skype conversations. So much for privacy.
The method outlined involved the installation of malware referred to as the "Skype Capture Unit" that would be delivered in an executable file that "can for instance be attached to an e-mail or directly be installed on the target machine." This software would then transfer unencrypted conversations to a remote Skype Recording Server that can record and replay 10 Skype interceptions in parallel. The Recording Server then sends the conversations through to Skype and their intended destination, a classic "man in the middle" attack that is difficult for the compromised user to detect.