In order to find out if your sound card is able to record sound, run Sound Recorder to see if you can record sound from your computer.
Here is how (Based on Windows XP):
1. Locate “Volume” icon on your taskbar and double click to open Volume Control dialog box. 
1.1 If you cannot find the Volume icon, go to Control Panel > Double click the Sounds and Audio Devices icon. Click the Advanced button in Device Volume section under Volume tab.
2. From the Volume Control dialog box, click Options menu > Properties.
3. Select Recording in “Adjust Volume for” section, and select all the volume controls appears in the bottom half of the screen. Click OK to continue.
Note. You may see a different devices listed depending on your sound card.
4. You will see the Volume control dialog box is now changed to “Recording Control”, leave this window open, and run Sound Recorder: Start > All Programs > Accessories > Entertainment > Sound Recorder.
5. Now you should have both Sound Recorder and the Recording Control on your screen, let’s play music. You can play any music using any music player like Windows Media Player or iTunes, for example.
6. Click Record button on the Sound Recorder while you’re playing music to see if you can see wave in the black rectangle box inside the Sound Recorder.
7. If the green line does not move, select different recording device from the Recording Control window.
8. If you found the right device to record sound from your computer, you can close all the applications we just opened and run liteCam to start recording.