I've been looking for a while solutions for sound generation on the arduino. Most of the solution I've found till now all required using a quite costly shield. But it's over with the Mozzi Library!
This library allows you to output a 8 bit audio output which according to the sample on the website sounds pretty good. It comes with example sketch and the best part is, all the hardware you need is a jack socket connected to the arduino PWM output! If you are able to hear a sound at 16384 Hz, the carrier frequency might be audible but a simple low pass filter will solve this problem
A project using this library: the X-or synth! The use of Mozzi with bit operator to process the signal gives some pretty nice sounds.