Skype called the 4.0 launch its "most distinctive new release in the company's five-year history." Updated features include video that Skype said lets users feel like they're speaking face-to-face with others and upgraded picture quality.

"Video calling has emerged as a very popular way for people to communicate online," said Mike Bartlett, director of product strategy at Skype, in a statement.

Call quality has also been substantially improved in the new version, Skype said. The new audio codec can achieve wideband audio quality using 50 percent less bandwidth than previously required. In addition, the upgrade features a super wideband audio that delivers clearer calls to people using a compatible headset and a high-quality broadband connection. The bandwidth manager interacts with the codec to adjust quickly to fluctuating bandwidth conditions. Another upgrade is a "smart help" feature that picks up sound problems and helps users fix them during calls.

Skype users also will find all of the features they have come to expect—free voice and video calls to other Skype users, instant messaging, SMS, as well as calls to landlines and mobile devices around the world at very low rates. A new conversations tab lets users track of multiple conversations in one place and allows them to switch to preferred communication methods as well.

Skype can now also be used in two different views. The default view contains everything in a single window, and the compact view allows users to resize or put each conversation into separate windows.

To run Skype 4.0, users will need a PC running Windows 2000, XP or Vista. (Windows 2000 users require DirectX 9.0 for video calls). Skype also recommends broadband as GPRS is not supported for voice calls and results may vary on a satellite connection. For voice and video calls, the company said computers with at least a 1GHz processor and 256 MB of RAM deliver the best results.