Using Camera in the Android emulator
In your AVD advanced settings, you should be able to set front and back cameras to Webcam() or Emulated.
Some elaboration, in the hope of clarifying what has already been said:
As stated above, Webcams are supported natively in the current SDK, but only on recent android versions (4.0 and higher)
Webcam detection is automatic where present. In 4.0.3, the camera defaults to the front-facing camera so a lot of applications (especially pre-2.3 applications, which can only fetch the default camera, i.e. the back-facing one) will still show you the old checkerbox-with-moving-square stand-in instead.
I think some more info is available in the following post: Camera on Android Eclipse emulator:
Or at least, that's the most information I've been able to find--aside from the brief, uninformative statements in the release notes for the SDK tools.