From here:

Microsoft has unveiled a new feature for Skype that’s almost straight out of Star Trek’s science fiction world — an app that translates conversations between speakers of different languages in real time.

“It’s going to make sure you can communicate to anybody without language barriers,” said Microsoft CEO Satya Nadella while introducing the new feature at the Code Conference in San Francisco.

“In fact, it’s the most human of things.”

Here it is in action:

http://www.youtube.com/watch?v=akbflkF_1zY