Microsoft has announced that a limited number of preview spots are available to test Skype Translator. 

From the Skype Translator page: http://www.skype.com/en/translator-preview/, here's what Skype Translate will do:

Speak another language without learning another language. Simply set up a Skype video or voice call with someone who speaks another language to you and start talking.

* Your conversation is translated into their language in real time. 
* And what they say is translated back in your language. 
* An on-screen transcript of your call is displayed. 
* Instant message chats in 45 languages can be translated.

In September 2014, Microsoft did a live demo: 
http://www.youtube.com/watch?v=cJIILew6l28


Dev Anand