Happens on Dapper 2.6.15-21-k7
It mutes it if it is actually 'off' but if it is just at 0 but on then you still hear it;
note one confusion is that the Gnome Volume Applet shows its mute symbol and ticks its 'mute' menu item when you drag the volume down to 0, but in this case still leaves the output 'on'.

dg@gallifrey:~$ cat /proc/asound/cards
0 [AudioPCI       ]: ENS1371 - Ensoniq AudioPCI
                     Ensoniq AudioPCI ENS1371 at 0x1080, irq 177

dg@gallifrey:~$ amixer
Simple mixer control 'Master',0
  Capabilities: pvolume pswitch pswitch-joined
  Playback channels: Front Left - Front Right
  Limits: Playback 0 - 31
  Mono:
  Front Left: Playback 0 [0%] [on]
  Front Right: Playback 0 [0%] [on]
Simple mixer control 'Master Mono',0
  Capabilities: pvolume pvolume-joined pswitch pswitch-joined
  Playback channels: Mono
  Limits: Playback 0 - 31
  Mono: Playback 16 [52%] [on]
Simple mixer control 'PCM',0
  Capabilities: pvolume pswitch pswitch-joined
  Playback channels: Front Left - Front Right
  Limits: Playback 0 - 31
  Mono:
  Front Left: Playback 16 [52%] [on]
  Front Right: Playback 16 [52%] [on]
Simple mixer control 'PCM Out Path & Mute',0
  Capabilities: enum
  Items: 'pre 3D' 'post 3D'
  Item0: 'pre 3D'
Simple mixer control 'Line',0
  Capabilities: pvolume pswitch pswitch-joined cswitch cswitch-joined cswitch-ex
clusive
  Capture exclusive group: 0
  Playback channels: Front Left - Front Right
  Capture channels: Front Left - Front Right
  Limits: Playback 0 - 31
  Front Left: Playback 0 [0%] [off] Capture [off]
  Front Right: Playback 0 [0%] [off] Capture [off]
Simple mixer control 'Line In->Rear Out',0
  Capabilities: pswitch pswitch-joined
  Playback channels: Mono
  Mono: Playback [off]
Simple mixer control 'CD',0
  Capabilities: pvolume pswitch pswitch-joined cswitch cswitch-joined cswitch-ex
clusive
  Capture exclusive group: 0
  Playback channels: Front Left - Front Right
  Capture channels: Front Left - Front Right
  Limits: Playback 0 - 31
  Front Left: Playback 25 [81%] [on] Capture [off]
  Front Right: Playback 25 [81%] [on] Capture [off]
Simple mixer control 'Mic',0
  Capabilities: pvolume pvolume-joined pswitch pswitch-joined cswitch cswitch-jo
ined cswitch-exclusive
  Capture exclusive group: 0
  Playback channels: Mono
  Capture channels: Front Left - Front Right
  Limits: Playback 0 - 31
  Mono: Playback 0 [0%] [off]
  Front Left: Capture [on]
  Front Right: Capture [on]
Simple mixer control 'Mic Boost (+20dB)',0
  Capabilities: pswitch pswitch-joined
  Playback channels: Mono
  Mono: Playback [off]
Simple mixer control 'Mic Select',0
  Capabilities: enum
  Items: 'Mic1' 'Mic2'
  Item0: 'Mic1'
Simple mixer control 'Video',0
  Capabilities: pvolume pswitch pswitch-joined cswitch cswitch-joined cswitch-ex
clusive
  Capture exclusive group: 0
  Playback channels: Front Left - Front Right
  Capture channels: Front Left - Front Right
  Limits: Playback 0 - 31
  Front Left: Playback 0 [0%] [off] Capture [off]
  Front Right: Playback 0 [0%] [off] Capture [off]
Simple mixer control 'Phone',0
  Capabilities: pvolume pvolume-joined pswitch pswitch-joined cswitch cswitch-jo
ined cswitch-exclusive
  Capture exclusive group: 0
  Playback channels: Mono
  Capture channels: Front Left - Front Right
  Limits: Playback 0 - 31
  Mono: Playback 0 [0%] [off]
  Front Left: Capture [off]
  Front Right: Capture [off]
Simple mixer control 'IEC958',0
  Capabilities: pswitch pswitch-joined
  Playback channels: Mono
  Mono: Playback [off]
Simple mixer control 'PC Speaker',0
  Capabilities: pvolume pvolume-joined pswitch pswitch-joined
  Playback channels: Mono
  Limits: Playback 0 - 15
  Mono: Playback 9 [60%] [on]
Simple mixer control 'Aux',0
  Capabilities: pvolume pswitch pswitch-joined cswitch cswitch-joined cswitch-ex
clusive
  Capture exclusive group: 0
  Playback channels: Front Left - Front Right
  Capture channels: Front Left - Front Right
  Limits: Playback 0 - 31
  Front Left: Playback 23 [74%] [on] Capture [off]
  Front Right: Playback 23 [74%] [on] Capture [off]
Simple mixer control 'Mono Output Select',0
  Capabilities: enum
  Items: 'Mix' 'Mic'
  Item0: 'Mix'
Simple mixer control 'Capture',0
  Capabilities: cvolume cswitch cswitch-joined
  Capture channels: Front Left - Front Right
  Limits: Capture 0 - 15
  Front Left: Capture 0 [0%] [off]
  Front Right: Capture 0 [0%] [off]
Simple mixer control 'Mix',0
  Capabilities: cswitch cswitch-joined cswitch-exclusive
  Capture exclusive group: 0
  Capture channels: Front Left - Front Right
  Front Left: Capture [off]
  Front Right: Capture [off]
Simple mixer control 'Mix Mono',0
  Capabilities: cswitch cswitch-joined cswitch-exclusive
  Capture exclusive group: 0
  Capture channels: Front Left - Front Right
  Front Left: Capture [off]
  Front Right: Capture [off]
Simple mixer control 'External Amplifier',0
  Capabilities: pswitch pswitch-joined
  Playback channels: Mono
  Mono: Playback [on]