I encountered a Dell Inspiron 1525 preloaded with Windows Vista that suddenly stopped audio sounds. All settings seemed correct at first glance. Device Manager showed the sound device working properly.
So I booted off of an Ubuntu 9.10 live CD, and when the Linux desktop came up, sound came from the computer speakers. Thus the hardware was confirmed to be working.
Rebooting into Windows, I soon discovered the source of the trouble. In the Control Panel applet for sound, this particular machine showed two sound devices. The selected one was named something like "Digital Output Device (SPDIF)" while Laptop Speakers was not selected. I simply selected the Laptop Speakers list entry, then clicked the "switch to this device" button, and the laptop resumed making sounds.