see soundcloud.com for an example, but basically I am wondering what technology allows for sound waves to be mapped like this, and also what programming modules are available for creating visual output from audio input, if that makes sense (preferably a python module :)
PyAudio (http://people.csail.mit.edu/hubert/pyaudio/) should allow you to analyse audio input and then you can use something like PyGame or PIL to create visual output.
I found an example of something like you might want here: http://www.stuartaxon.com/2010/05/17/shoebot-spectrograph/
You are also likely to need numpy for doing Fast Fourier Transform.