found this on the Motorola help forums.
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"Hello Droid/Milestone owners,
I have a French Motorola Milestone and here is what I noticed about the bad sound quality received by the other person. I admit I did not read all the messages, sorry if it's duplicate.
The fact is the Milestone (and I guess the Droid too) uses a two-microphones system for noice cancelling. One microphone records the voice; the other records the ambiant noise. The latter is located behind the phone, near the jack plug (there is a really tiny hole). I think the noise cancelling algorithm tries to suppress the ambiant noise from the voice... but apparently also suppresses a part of the voice itself for some users.....
What I tried was to put something like a tissue on top of this noise cancelling microphone, so that the algorithm has nothing to suppress to the voice. And that worked pretty well. Attached are recordings I made to show this. Sorry, they are in French, but I think there is no need to understand to see the difference.
Tomorrow, I will call Motorola France again and ask if there is a way to deactivation noise cancelling by software. In the meantime, I'll be glad to hear what you think about this and your results if you tried.
Yann
https://supportforums.motorola.com/message/99025#99025