This has been discussed before. It should go in a FAQ thread (...it may already be in one) because it's one of very few widespread complaints about the Droid.
When I first got my Droid, I immediately ordered a two piece plastic cover off Ebay. It was dirt cheap, fits like a glove, and I was really very happy with it.
My wife got our Droids at the same time, and she bought a similar plastic case at the Verizon store. I wanted something a little different than what they had, so I got one off Ebay. Bothe are two piece plastic cases that clip to the bezel on the front & back of the phone.
At first, I didn't really use the phone too awful much as a phone. I was just really busy playing with my new toy. But after a while, it became obvious there was a problem, as everyone was asking me to repeat myself. Funny thing was that I had been talking about how great the phone was to all my friends, and most didn't want to burst my bubble by telling me how much the receiving end sound quality sucked for them! lol
So I looked at my wife's Droid, and saw that her case (Verizon Store bought case) had a notch cut out where the mic is, and my Ebay case didn't. So I filed a small notch in the bezel and put it back on the phone.
There seemed to be an immediate improvement. But as time went on, both my wife & I were still getting complaints from others about sounding muffled.
As it turns out, there is a secondary microphone on the back (top) of the phone that is for noise cancellation. When this is covered, we Droid users apparently sound like we have a sock in our mouth.
Both my wife's Verizon Store bought case and my Ebay cheep-o case do not have a hole in the back to let that mic breathe.
I've since carried my Droid commando in a belt case, and now I sound crystal clear.
This secondary mic is apparently very sensitive, and if your hand covers it while you talk, it can have the same effect.
I have NOT done any actual testing to confirm this, but this seems to have fixed my issue.