Start > All Programs > Accessories > Entertainment > Volume Control
Make sure that the Wave column slider is not right at the bottom or you will hear no sounds.
Double check that the Mute All box is not ticked.

Your svchost.exe error, can you tell us more about it?
svchost.exe handles a lot of Windows programs, and a lot of things can trigger this error.
Did this happen during Windows update? Right after you log in? Open any particular programs? Any other situations that triggered it? Is it random?