Recording

The most realistic sound effects may originate from original sources; the closest sound to machine-gun fire that we can replay should be an original recording of actual machine guns.

However, real life and actual practice do not always coincide with theory. Often recordings of real life do not sound realistic on playback. That is why we have Foley and f/x.

Less realistic sound effects are digitally synthesized or sampled and sequenced (the same recording played repeatedly using a sequencer).

Depending on the effect, recordists may use several DAT, hard disk, or Nagra recorders and a large number of microphones. 

Processing effects

The most common sound design tool is the use of layering to create a new, interesting sound out of two or three old, average sounds.

Techniques

Typical effects used:

• echo - to simulate the effect of reverberation in a large hall or cavern, one or several delayed signals are added to the original signal. To be perceived as echo, the delay has to be of order 50 milliseconds or above. Short of actually playing a sound in the desired environment, the effect of echo can be implemented using either digital or analog methods.
• flanger - to create an unusual sound, a delayed signal is added to the original signal with a continuously-variable delay (usually smaller than 10 ms). This effect is now done electronically using DSP.
• phaser - another way of creating an unusual sound; the signal is split, a portion is filtered with an all-pass filter to produce a phase-shift, and then the unfiltered and filtered signals are mixed. Phasers are often used to give a "synthesized" or electronic effect to natural sounds, such as human speech.
• chorus - a delayed signal is added to the original signal with a constant delay. The delay has to be short in order not to be perceived as echo, but above 5 ms to be audible. If the delay is too short, it will destructively interfere with the un-delayed signal and create a flanging effect. Often, the delayed signals will be slightly pitch shifted to more realistically convey the effect of multiple voices.
• equalization - different frequency bands are attenuated or boosted to produce desired spectral characteristics. Moderate use of equalization (often abbreviated as "EQ") can be used to "fine-tune" the tone quality of a recording; extreme use of equalization, such as heavily cutting a certain frequency can create more unusual effects.
• filtering - Equalization is a form of filtering. In the general sense, frequency ranges can be emphasized or attenuated using low-pass, high-pass, band-pass or band-stop filters. Band-pass filtering of voice can simulate the effect of a telephone because telephones use band-pass filters.
• overdrive effects such as the use of a fuzz box can be used to produce distorted sounds, such as for imitating robotic voices or to simulate distorted radiotelephone traffic. The most basic overdrive effect involves clipping the signal when its absolute value exceeds a certain threshold.
• pitch shift - similar to pitch correction, this effect shifts a signal up or down in pitch. For example, a signal may be shifted an octave up or down. This is usually applied to the entire signal, and not to each note separately. One application of pitch shifting is pitch correction. This effect is ubiquitous in karaoke machines and is often used to assist pop singers who sing out of tune.
• time stretching - the opposite of pitch shift, that is, the process of changing the speed of an audio signal without affecting its pitch.
• resonators - emphasize harmonic frequency content on specified frequencies.
• robotic voice effects are used to make an actor's voice sound like a synthesized human voice.
• synthesizer - generate artificially almost any sound by either imitating natural sounds or creating completely new sounds.
• modulation - to change the frequency or amplitude of a carrier signal in relation to a predefined signal. Ring modulation, also known as amplitude modulation, is an effect made famous by Doctor Who's Daleks and commonly used throughout sci-fi.
• compression - the reduction of the dynamic range of a sound to avoid unintentional fluctuation in the dynamics. Level compression is not to be confused with audio data compression, where the amount of data is reduced without affecting the amplitude of the sound it represents.
• 3D audio effects - place sounds outside the stereo basis
• reverse echo - a swelling effect created by reversing an audio signal and recording echo and/or delay whilst the signal runs in reverse. When played back forward the last echos are heard before the effected sound creating a rush like swell preceding and during playback

http://en.wikipedia.org/wiki/Sound_effect