If you want to use your webcam to its full potential then you need to check out Magic Camera 8.0. This software will work on any Windows system, from 2000 to 8, and is packed with tons of webcam effects and features.
The installation process is pretty quick, but you'll soon realize that you're either going to have to pay for the full version, or just check out the trial version for now. Now, to me, the user interfaces looks really cheesy and outdated, but there are some really cool effects, which you can find in the effects panel on the side. I like how the effects panel has its own window, so you can move it anywhere you want it, and resize it. You just want to be sure you don't stack too many effects on top of each other, or you might not end up with what you expected. There's a list below your webcam window to show you all the effects you have enabled at the moment, so it's easy to delete from that list.
Now, there are quite a few different effects that my webcam software doesn't have and there are some cool masks and scenes you can use. I like how you can even set up your camera to have a "picture in picture", from two video sources at once. Plus you can stream videos or pictures from your computer for other people to see.
But, like I said, you have to pay for the full version and the trial version has a banner on top of the webcam feed, as well as a watermark, that kind of scrunches the whole image. In fact, it doesn't even let me preview my webcam at its 720p size, so that's a pretty big downfall. I mean, the effects are cool and the other things you can do with this software is great, but it's put together really poorly so I don't think I'd be willing to pay for the full version myself. If it allowed you to preview at 720p and the interface looked a little better, then maybe, but I can't really recommend anyone use anything other than the trial version of this software.