Step 1: Purchase the equipment.
The package I purchased was the Light-O-Rama 16 Channel starter package, which includes:
LOR1602W - 16 Channel 30 Amp Controller
Light-O-Rama Software - Extended Edition
USB485B - USB to RJ45 Powered connector
50ft Cat 5e Network Cable
Total cost of $437.95
If you're savvy with electronics, you can purchase DIY kits for significantly cheaper.
Other equipment includes:
Computer to run the software
Christmas lights of your choice
Lots of extension cords
Some method of delivering sound to listeners
Time to design and program
A quick word on sound:
There are two ways I can think of to deliver the sound; using speakers, or an fm transmitter so people can listen in their cars. I will be using speakers for this demonstration. Also keep in mind that with fm transmission, there may be regulations on that in your area; and with speakers, respect your neighbors and keep the volume loud enough for bystanders to hear, but not so loud that you are disturbing neighbors.