How to output microphone directly to speakers?

In Windows 7:

1) Right click on the speaker icon in your system tray (bottom right of your screen). Go to Recording devices.

2) Locate your microphone in the list. I am assuming it is not disabled as you mentioned examples of it working previously. Right click, go to Properties. (Or double click the same Microphone entry)

3) Switch to the "Listen" tab, check off "Listen to this device". While Listen is checked, your microphone will be audible through your speakers, and in a more advanced facet, through stereo mix. So if you wanted to record your Mic and Stereo Mix, this is how you would do it, but at the expense of being able to still hear your mic (it throws most people off, like myself).

If you are using Mac OS X, you can do this with the free LineIn by Rogue Amoeba.