The version of Audacity I have is 2.0.2 and it is running on Windows 7. My laptop can pick up the sound normally, however when I play a Youtube video, it keeps on recording, but on Audacity, a flat line is present. I should also mention that I am wearing headphones when this is happening, because I want to sing with the video and see how I sound, so any help would be much appreciated 
http://manual.audacityteam.org/o/man/tutorial_recording_computer_playback_on_windows.html
Depending on your model of computer soundcard it may not be possible to record the sounds from the computer (e.g. YouTube) without additional software, see “Alternative programs for recording computer playback” via the link above.
And I don’t think there are any circumstances where you can record what the computer is playing and a live microphone at the same time. Plain computers only have a limited number of sound pathways and it’s easy to get feedback by opening up too many of them at once – if Windows even lets you.
Koz