How to create a virtual audio device and stream audio input with it
Here is a good option to VAC as an audio device driver, not external software and is FREE without the lame "Trial" announcements.
https://www.vb-audio.com/Cable/index.htm
One single input/output device for free and 2 additional devices can be added with a donation.
Give a try to Virtual Audio Cable. It creates virtual audio cards and let you route sound from outputs to inputs using virtual cables.
It runs with Windows 7. It's not free but there is a trial version, so you can check if it can do what you need.
https://github.com/rdp/virtual-audio-capture-grabber-device is my attempt at one. Free, open source! :)
ffsplit used to have something similar (now defunct?)
See also http://web.archive.org/web/20140222025420/https://superuser.com/questions/98720/is-there-a-free-or-open-source-equivalent-to-vac/364156