Sound cards generally use one of the following methods to create sound: FM and wave table synthesis.
FM synthesis creates sound by combining pure tones. These tones are of various strength and frequency. This is the cheaper of the two technologies.
Wave table synthesis creates sound by playing "prerecorded" sounds from a table of sounds that is stored in the memory on the sound card. This method reproduces sounds much more accurately than FM synthesis. However, wave table synthesis costs more. The more expensive wave table sound cards store multiple tables of 1-2Mb.
All sound cards generally have three components: audio digitizer, FM or wave table synthesizer, and a mixer.
The audio digitizer is actually a pair of converters: analog-to-digital, and digital-to-analog. The synthesizer has already been discussed above. The mixer combines the signal from the synthesizer, audio digitizer, and CD-ROM drive.
Newer sound cards come with DSP or digital signal processor. This chip does much of the sound processing that would normally be done by the CPU. DSP will speed up sound processing.