You can play audio, but you can't record anything! There can be many reasons why this is not working. Here are a few:
1.Make sure your hardware/microphone/guitar is plugged in properly!
2.Make sure that you are arming the correct input/source.
3.Make sure that the armed track's recording level is turned up.
4.Try recording with a different driver. Try ASIO, WaveRT and Wave in that order.
Always make sure that you have the latest drivers for your sound card. Visit your sound card manufacturer's website to see if there is an update.