Strange symbol preventing me from using sound, always muting.

I have been using the computer awhile now, and let my friend get on and use it for a few hours while I went out. When I came back, he complained that the sound didn't work and showed me this:
It's been 30 minutes and I still don't know what happened. He asserts he didn't change any settings except to allow internet sharing. Help!

Go into Systems Preferences > Sound > Sound Effects and make sure the mute button is NOT selected.