After installing Mac OS 8.1 on a NuBus-based Power Macintosh (including 6100-, 7100-, and 8100-based machines), the volume control in the Monitors & Sound control panel will not control the volume of speakers or headphones connected to the sound out jack.
Solution
Update to Mac OS 8.5.
Note: The volume control will work fine for the internal speaker on the computer, but will not adjust the volume of any device connected to the sound out/headphone jack on the back of the computer. If you are using external speakers, the volume control on the speakers can be used to control the volume. Also, some applications have a separate volume control that can be used to adjust the volume.