I found this,Download: Skype with Video on Android - Droid Life: A Droid Community Blog, while looking for an answer to my original question. This is for the Thunderbolt and when i try to install it on the Droid 3 it fails to install. Is there a way to make it work? Maybe by changing some file or something in it.
I think there used to be an issue on Froyo and earlier Android versions in that the FFC code was not unified between manufacturers. I thought I had read that once Gingerbread came along it would include standard code for FFC and then video chat would work. I was wrong or Skype hasn't updated yet.