This picture/poster was linked to from Hello, I'm the Doctor. I especially like the note on the "ears"/light bulbs: that they let off extra energy so the Dalek doesn't just spontaneously explode. I suppose that's a reasonable cover, given that the original rationale behind those flashing lights was probably something like, "Hey, wouldn't it be awesome if it had lights on its head? That flashed when it spoke?!"
Relevant in this particular instance is point (4), which reads as follows:
Inside the dome is the voice machine and translator unit, which connects to the control chamber (18). A Dalek has no vocal chords [sic], so this unit amplifies thought into speech and is sensitive to whatever language is necessary. For instance, an Englishman would hear a Dalek's "thought-noises" as though the Dalek were speaking English. This is best described as "Noise Telepathy." When anyone speaks to a Dalek, the process is reversed--it has no ears, but understands instantly.
This site seems to agree, stating that
Daleks have no vocal cords so this unit amplifies the Dal mutant's thoughts into speech patterns acceptable to the listener's brain. This process is reversed when the Dalek is spoken to.
These descriptions are, to me, a bit unclear. Take the first quote's description of the speech/translation process. It says that, given that the Daleks do not have an organic speech apparatus, this "translation unit" transforms their thoughts into speech. Okay, assuming a highly advanced alien race, I can suspend my disbelief long enough to let this slide past. But the description goes on to say that this translation unit is "sensitive to whatever language is necessary," and "an Englishman would hear a Dalek's 'thought noises' as though the Dalek were speaking English."
What does this mean? Does the unit, clearly already having telepathic capabilities, read the mind of the hearer in order to generate the proper language? Does it broadcast some sort of telepathic wave or other such nonsense that the hearer hears/receives and understands as being their own language? Anyway, the phrase "as though the Dalek were speaking English" seems to imply that the Daleks aren't actually speaking English, they're just perceived to be speaking English (or German, or French, or whatever). This brings to mind the passage in Acts where the disciples of Jesus preach to the masses and each man hears their words in his native tongue, and makes me wonder what the Daleks actually are saying (if anything). In reverse, the process is just as convoluted: apparently, the unit receives the audible input from a speaker, translates the entire thing into pure thought (including, apparently, highly culture- and context-dependent variables such as pitch, tone, stress, speed, emotional inflection, etc.--or not, given how obnoxiously literal and immune to humor and sarcasm the Daleks are!) and transmits it into the Dalek's mind as thought.
I cannot even begin to imagine what this would be like for the Dalek. First, it would require very precise cognitive control--how does the Dalek prevent the unit from translating every thought into speech? How does a Dalek lie? And how does it distinguish its own thoughts from those fed to it by the translation unit? Since humans are not generally telepathic, psychic communication is generally represented as audible speech in the media, usually with an echo effect; but that is still audible speech, represented so for humans, for whom audible language is the default mode. The Dalek would have no such echoing voices to distinguish each thought from another; from this description, they would have no concept of "word" or "language" at all, since they apparently deal directly with pure thought.
How does a creature with no voice and no ears conceive of speech as distinct from thought at all? With no way of producing or receiving language (no vocal organs or ears, as noted above), how can the Daleks understand this process at all? What sort of language could an alien have that has no way of creating or receiving language? The other options are telepathic communication and some sort of sign language/visual communication. The translation unit clearly has telepathic capabilities (it adapts to "whatever language necessary" and can clearly manage psychic input) but the Daleks specifically developed aparati to enable them to speak audibly--why, if they can communicate telepathically? Even when there are no other non-Daleks around, they still insist on shrieking obnoxiously at each other. As for sign language, the robotic shell they are encased in barely has enough mobility to function, let alone produce an entire language based on visual signs.
As a side note, the Daleks do seem to have one word of their own that is consistently left untranslated: "rel", which seems to correspond to the English "second" (as a unit of time). Why a high-tech telepathic translator would choose to leave this word untranslated when it has a simple counterpart in the target language (and, furthermore, is inflected as an English word; the Daleks often initiate a countdown from "thirty rels" or whatever) must mean either that (1) the Daleks, either intentionally or not, choose to preserve this word and distinguish it from their rest of their translated speech or (2) the word "rel" isn't actually a direct translation of the word "second." Given that the Daleks, like the Time Lords, have time-traveling capabilities and therefore would need specialized vocabulary (or thought-noises?) to deal with the mechanics of time travel, it's very possible that the word "rel" has additional senses or shades of meaning that are not captured by the English "second." It could also be a holdover from the language of the Kaleds, although certainly not for sentimental reasons. Being unfamiliar with Old Who, I have no idea if this word came up in Old Who episodes; even if it did, though, the TARDIS translation circuit should have translated it anyway, so the problem remains unresolved.
Anyway, these descriptions of the Dalek's mode and method of speech leave much to be desired. One would think that if a thoroughly malevolent alien race had not only impenetrable armor, unstoppable death rays, and time-traveling capabilities, but also a highly functional telepathic translation unit theoretically capable of reading the thoughts of their victims and transmitting their own thoughts into the minds of others, there would be nothing (short of an inability to climb stairs) that could stop them from very swiftly taking over the universe, not even a mysterious and overconfident bloke with modern hair and a screwdriver. And furthermore, with such a sophisticated thought-speech-thought translation system, they could come up with a more refined auditory output than grating, repetitive, robotic shrieking. Then again--maybe such speech is rather a painfully accurate rendering of what a Dalek's thought patterns are really like.
I hope to return to this topic someday, perhaps when I get around to analyzing the nature of the TARDIS's translation circuit, which shows similar features. For now, more research needs to be done.