Disclaimer: Please do not play music in any TeamSpeak channel other than the dedicated music channel. Playing music in any other channel is considered "hot-micing", which is prohibited.
To get the best quality sound, we'll be using a Virtual Audio Cable, or VAC for short. A VAC is a driver that links audio output (speaker, headphones, etc.) directly to an audio input (microphone) via a "virtual" link between drivers. There are many VAC programs available, but for Windows I recommend using Eugene Muzychenko’s Virtual Audio Cable (EMVAC). It appears that EMVAC is no longer freeware. Here is a list of suitable free and donationware replacements. It has a pretty old-school interface, but it's a pretty capable piece of software. The rest of this guide assumes you are using this VAC program, but the same concepts can be applied to other similar applications/drivers.
Once you install EMVAC, a virtual line should be automatically created called "Line 1". If you want to add or remove lines, you can open the VAC control panel in the Start menu.
Setting up your TeamSpeak capture profile
Open your TeamSpeak 3 client and go to [Settings -> Options]. Head over to the "Playback" tab, and create a new profile by clicking the "+" at the bottom of the profile list. Let's call it "Audio". It doesn't matter what Playback Mode or Device you use, just set both sliders to the minimum value.
Now that your playback profile is set up, head over to the "Capture" tab. Again create a new profile named "Audio". For this profile, we're going to set the Capture Device to "Line 1", and use Voice Activation Detection to toggle transmission. Bring the threshold slider all the way to -50.
That's it! Now, whenever you want to start playing some audio, all you have to do is select your "Audio" profiles from [Self -> Capture Profile] and [Self -> Playback Profile].
Playing music through YouTube
Playing from a YouTube playlist has the benefits of providing a much larger library of songs at your disposal, but it comes with the pitfall of having to mute all other audio sources (unless your browser lets you choose an audio output device, but most do not). Right-click on the audio button on your taskbar, and select the "Playback Devices" option.
You will be presented with a list of available audio output devices. Scroll down and find the "Line 1" device that EMVAC created, right click it and select "Set as Default Device" from the pop-up menu.
Now, anything you play will be transferred over "Line 1". Since TeamSpeak is using that line as an input, everybody will hear whatever sounds are playing on your system. However, this also means you will have to mute everything that you don't want to play over your music. This means silencing Windows notifications and muting your Minecraft client.
Now, just head over to YouTube and play music to your heart's content! Remember, all sounds on your PC are audible over TeamSpeak, which includes advertisements: You may want to mute YouTube while those are playing. If you want to shuffle a playlist, you can use RandomTube to shuffle your songs.
But Timmy, I can't hear anything now!
When you change your audio output to "Line 1", audio will no longer be streamed through your default audio driver (speakers, headphones, etc.). To get around this, head over to the Recording Devices list by right-clicking on the Audio button in your task bar.
Find "Line 1" in the list of recording devices, right-click on it, and go to the Properties. Click the "Listen" tab, and choose a device to play back through. I use my monitor's speakers, so I chose that from the list.
Presto! Now everything that plays through "Line 1" will also play over my monitor's speakers. Yay!
Playing through VLC
If you have VLC, you can bypass setting "Line 1" as your default playback device each time you want to stream music. Open VLC's settings and head over to the Audio tab. If you haven't already, hit the "Show All Settings" checkbox at the bottom of the menu to view advanced settings. Find the Output Modules tab under Audio and select "Line 1" as the Output Device.
Presto! Now everything VLC plays is sent to "Line 1", and you don't have to mute anything on your system or mess around with any system settings. Just be sure to use your "Audio" capture and playback profiles in TeamSpeak!
That's all there is to it!
If you have any issues, feel free to leave a comment, and I'll try to answer as quickly as possible
