You might receive the "Sorry, no webcam was found on your system" error for any of the following reasons:

• You don't have a webcam installed on your system (duh).
• You have a webcam installed, but it is not plugged in to your computer.
• Another application is using your webcam. Close the other applications and try again.
• Other applications might have crashed or not released the camera. Try rebooting your system.
• Your camera might not be installed correctly. Try reinstalling your camera.
• Yahoo! Phone OutYahoo! Messenger is using the incorrect camera device. Try changing the camera source.
• Your camera might not be configured correctly. Try configuring your camera.
• Your camera is not compatible with Yahoo! Phone OutYahoo! Messenger. Take the webcam compatibility test.

That's a lot to troubleshoot, but hopefully starting at the top of the list and working your way down will help you get your webcam up and running.