I've Skyped with my son's family twice. They've contacted me, and I press the video icon to answer their call. I held the camera the first time, taking it to the garden and around the yard. The second time, I propped the camera up during the call.
I'm not aware of a way to use the digital zoom, and it's such poor quality, I wouldn't want to use it. As you can see from the screen snapshot, my image is in the lower right corner of the screen. Adjust your distance from the N7 to make the lower right corner image show more than your nose.