The Skype app for Android just got a lot more useful with today's update which brings support for free (data charges still apply) two-way video calling. Unfortunately there's a catch as this functionality is available only on four (Android 2.3) handsets.
According to Skype, video calling works on the Google Nexus S, HTC Desire S, Sony Ericsson Xperia neo and Xperia pro, with extra support being planned for the near future.
Other goodies included in Skype 2.0 are a tweaked UI (user interface) and SMS support. Skype 2.0 is free and can be downloaded from the Android Market (requires Android 2.1+).