First make sure your cam is plugged in properly and is not open in any other applications. Also, make sure you have Flash player 9 or greater.
Next ctrl-click anywhere on the chat screen. This will bring up a pop-up menu.
These are a list of settings. The only ones to be concerned with are first:
Quality> Low/Medium/ High... choose "High" preferably.
Next go down to the "Settings..." option.
This will bring up a small Flash Player settings window. The chat window will appear to have a grey screen over it while the settings window is open.
Options at bottom left to right as follows:
Display> check the box that says hardware acceleration.
Privacy> Allow to access your camera and microphone?
Check radio button Allow. Check box Remember.
Local Storage> How much information can store on your computer? This is up to you. You may set the slide bar for whatever you are comfortable with. Leave the Never ask again box unchecked in case you wish to change this setting in future.
Microphone> There is a drop down menu. Unless you have another microphone or external cam with its own microphone, choose Built-in Microphone option.
You can check the volume by speaking or playing music while watching the meter on the left. As long as its green and not into the orange or red you are fine.
Check the Reduce Echo box.
Camera> Choose from the drop down menu the appropriate camera. If you are not sure of which camera to select, try all of them. At least one should work.
Hit close. You are now back to the chat room and the grey screen should be gone.
Select the camera icon under the My Camera window on the top left. The microphone icon selects outgoing sound on or off. Thats it. Enjoy your cam.
You need adobe flash for the cams to work and as Apple fell out with adobe years ago, all their devices don't have flash.
See this other thread!
http://www.swingingheaven.co.uk/swingers-forum/viewtopic/398239.html
There's a workaround (with a handy video) explained here
Flash is the issue here, follow my fix in the link above. I had the exact same issue here and if you do the 3 simple steps in my post you will be fine. Adobe is aware of the issue and there will most likely be an update to fix it from them soon. The only newer version above what is current for Lion is a beta which would probably not fix your issue and most probably break more things.
Just follow the 3 steps in my fix and you will be fine until its patched by adobe. Not too much of a security either as only allowing access always to the chatroom url. So not a scary workaround at all.
Any issues still give me a nudge and ill happily help anyone out too
Cheers
J