Basically the noise cancelling software is active and not functioning how Apple intended as it is cancelling out the users own voice.
You can identify that this is the case by switching your call to speaker mode (or plugging in your iPhone headphones) and the person on the other end of the line can hear you clearly.
There are several factors that could cause this to happen:
- iPhone cases a good understanding/explanation about the possible reasons is shown here by Marty Huie on YouTube.
- Change in settings. I currently have no verified reference for this but it has been mentioned in possible solutions on a couple of forums.
- iOS Error
To resolve the issue you'll need to go through the following:
- Try a Hard Boot or Reset by holding down the home and sleep buttons at the same time, wait for the Apple logo, let go of the buttons.
This does two important things:
- Clears any unsaved cached data which gives a clean slate for any apps or settings having any issues.
- Drops and reestablishes a connection with your carrier, Bluetooth, wireless etc. in-turn resetting and reconnecting any applications.
- If that does not work try a Restore in iTunes this will restore your iOS to a point where there were no issues, you can then test and reapply your backup for Applications etc.
- If both of the above fail you'll need to get it serviced as it's possibly a hardware issue.