Skype has been running a project dubbed Chess to test methods to allow law enforcement to listen in on users' phone calls. According to the New York Times Project Chess was set up after the company started having discussions with the US government over monitoring communications.

The Project Chess team, which never numbered more than a dozen people was told to come up with legal and technical issues of letting the US government monitor Skype traffic. According to the PRISM PowerPoint released by NSA whistleblower Ed Snowden, Skype joined that program in February 6, 2011, but it now appears that calls may have been monitored before this time. Skype always denied this.

Writing in his blog, Security guru Bruce Schneier said that the recent news about Prism refocused attention on Skype.

"Reread that Skype denial from last July, knowing that at the time the company knew that they were giving the NSA access to customer communications. Notice how it is precisely worded to be technically accurate, yet leave the reader with the wrong conclusion," he wrote.

More here.