Sounds really obvious, but have you been moving 'something', before the system went mute? Say adjusting your monitor, with its inbuilt speakers (if you have any) ? Because starting with sound and it slowly fading away could be related to cables which haven't been properly plugged in.
Otherwise could you alt-tab to your desktop and see if the speaker-icon in the tray has a big red X covering it? (Which would indicate something wrong with the hardware/software.)
Also, really obvious, but make sure the default playback device actually points to your speakers (and not your soundcard) -- the soundcard can't (well, it can but then something is really wrong...) make the noise!

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