Brian Neltner, a graduate of MIT, has outlined the steps he took to create the Saiko5, a WiFi Music Responsive LED Dance Light. You can have a look at the step by step guide here.
The Saiko5 has been used for the Burning Man 2010 and 2011, Temple of Visions in LA, and a number of other events. The photos below are from, where 10 Saiko5 units were used for the Acoustic Combustion installation.
A video demo of the Saiko5