Had this problem recently, and it seems many many others have had it too.
My USB headset stopped working out of the blue. I switched to another USB port and it worked for a few weeks until that too stopped working. I don't know what triggered the failures, but probably an application not properly cleaning up after itself.
Opening "Playback devices" by right clicking on the sound icon in the bottom right corner of the Windows screen and then testing the device gave the "The device is being used by another application" error. Thanks Windows, but which application exactly?
Some forum posts suggested using sndvol to determine, however this showed no other applications using the device. Other posts suggested restarting the Windows Audio service, clicking or unclicking the exclusive access options from the device and disabling and enabling the device. Nothing made the slightest bit of difference. Eventually the headset stopped working in my final remaining USB port, so a solution had to be found...
The fix: eventually (= best part of a day wasted) I stumbled upon this procedure: Open the Device Manager. Under Sound, video and game controllers find your device. Double click on it, Driver tab, Uninstall. Unplug the USB headset, and then plug it back in. The drivers reinstalled automatically and the sound worked once again. I had to do this separately for each port, and as I'm running VMWare I had to do it again for all the ports in the guest VMs.
My setup: Dell Precision laptop, Windows 7 Pro, Sennheiser PC26 USB headset, VM Workstation.
