When you key the microphone (T or F12 by default) in the game do you hear a beep? If yes, then the game is recognizing the microphone.
Make sure you have selected "101", in the "V" (voice), as the frequency.
If you do not hear a beep when you key the microphone, then your microphone is not selected as the default recording device in Windows.
If you are behind a router, then you need to make sure the router is set to allow inbound UDP connections to your computer. The easy way to test this is to by-pass the router and see if it works.
