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Is it possible to send audio from different applications to different devices? Suppose I want to play a game and run Skype, can I set something up so all the game audio goes to the speakers while the Skype audio goes to an earpiece?

In skype you can choose what output device you want to use.

there are also programs like virtual audio cable that let you set different devices/mix sounds if your sound card sucks and doesn't have an audio mix.

Win 7 is pretty good with this; if your speakers are 'default' and you tell skype to use your headset it'll split the sound properly. After years, Skype even remembers these settings now.