Amanda Ghassaei has published on her website an interesting project: the Glitchbox.
This instrument can do two different things:
-it can be used as a standalone audio device, with the audio data stored in the arduino’s flash memory
-it can also be used to sequence MIDI through a usb connection to your computer
There is also a detailed instructable with all the information needed.
For more detail: Glitchbox – audio sequencing music instrument