Hi,
At first, there was no subtitles showing when I was watching a movie. So I tried to watch something I knew subtitles were working and it still didn't show up. I tried reinstalling VLC, deleting preferences and cache, with the latest version (1.1.10, I'm not sure I had this version before though) but it still is not showing up. I also tried changing the font and default encoding, nothing happened (so I put it back to default). Then I realized that I couldn't see any characters, not only subtitles ; when you use shortcut keys like when you change the proportions of the video or when you turn on or off the audio, you have a text saying it, but now it doesn't show up too. I tried with .avi, .flv and .mkv, it's the same thing.
It works fine with Windows media player.
My config : Windows 7 Home premium 32bit SP1, Pentium Dual-Core 2.1 GHz, 4,0GB ram, Mobile intel 4 series express chipset family, Realtek High Definition Audio.