Client update tomorrow, with the basics for sound!
When the client starts up, it starts a sound download thread. This thread connects to minecraft.net and looks for new sound resources. If it finds any, it starts downloading them. When the sounds have been downloaded, the sound manager gets notified that there are new sounds.
Short sounds get loaded into ram for faster mixing. Longer sounds (music, environmental sounds) just get listed.
If a sound file ends with a number, the number gets removed when the sound is loaded, and the new name gets a pool of potential samples. For example gravel1.ogg and gravel2.ogg would exist as two versions of “gravel” in the game. When the game tries to play “gravel”, it plays a random one from the pool.
All sounds can have varying volume and pitch.