If I play any other game than Garry's Mod, it will pick up the sound from that game and will also pick up my Microphone.
However, when I try to record in Garry's Mod, it will record my Microphone but not the sound in-game.
I feel like this happens with most Valve games in general, due to the source engine that they're using.
One user was having issues with AMD's audio drivers interrupting his Motherboard audio drivers. He had to disable the AMD audio drivers in order to get it working. Does this sound like it might be happening to you?