Sound in games have come a long way from the bleeps and bloops found in a 2600. Even the relatively ancient Super Nintendo's sound, with its amazing sound chip technology, pales in comparison with what can be achieved in todays games. Similar to film, there are two main aspects of Sound in games: Sound design and Music.

Sound Design is the creation of diegetic sound effects, dialogue, and non-diegetic effects such as UI sound in order to give the player an atmospheric sense of presence that can only be achieved with sound.

Music is the scoring of a game, either by having level or scene specific music, or creating pieces that alter slighty based on performance or progress.

Visit the Sound/Music Forum for more discussion!

Sound Tools:
Audacity
Finale
Garage Band (OSX only)
Protools

Sound APIs:

Audiere
BASS
DUMB
FMOD
Hekkus Sound System
IrrKlang
libMikMod
libsndfile
Ogg Vorbis
OpenAL
PortAudio
SDL_mixer (requires SDL)
SDL_sound (requires SDL)