I have added Stereo Mix to my recording devices on my laptop running Windows 7 after I have installed the driver for my soundcard (the sound was working until then with the driver from Microsoft, but there was no Stereo Mix).

Trying to record Skype calls I found that some people recommend Stereo Mix in combination with Audacity.
The present question is more limited, (and in fact I do not want to know how to record Skype) I just want to know here a few things about this device:
- What is it meant for? What is its main use?
I can record sounds that are played on the computer - and they are captured it looks like from the soundcard, as if by a virtual microphone. So, is this what Stereo Mix is meant as? A virtual microphone? Does it have settings of some kind? - can other inputs be added to it (similar to the aggregate device in Mac) so that, for example, when it is set as input device for an application, to capture both the "internal" sounds and the real mic?