Mbed platform is based on LPC1768 microcontroller which has a great power to perform most signal processing in audio level. Current effect generator is fairly simple as it uses a standard electret microphone that is connected through several stages of OP amps operating as buffer, amplifier and low pass filter (10-15kHz). Then signal enters a microcontroller for some processing. And then signal leaves microcontroller via DAC to output amps.
Effect platform is doing great job. It can do simple tasks like delay, echoing. For more audio effects there is more complex signal processing needed like FFT and digital filtering where DSP processor would be better choice. But still mbed platform is quite powerful to try more.