Lab3, the Laboratory for Experimental Computer Science at the Academy of Media Arts Cologne, posted this tutorial on how to perform realtime audio processing with an Arduino. They explain:
This is an experiment to show how some realtime audio processing can be done with the Arduino. The first set of examples alter an incoming audio signal and put it back to an audio output. We achieve effects like Reverb, Phasor, Flanger or Ringmodulator. The second set of examples are outputting computed waveforms like Sinewave, Bell and Xylophone sounds.
Full source code and circuit diagram are included.