Obsidian's audio director Scott Lawlor has written a lengthy article titled "The Music of the Mojave Wasteland" for Gamasutra. Here are some short bits:

Fallout is a game that allows for its players to choose their own role, and their own morality. Some players play the good guy, and others play the bad guy. We decided that the music system should reflect that.

If the player runs through the town of Goodsprings and kills everything in sight, the music will reflect that with a dark, foreboding tone. If the player is helpful to the townsfolk and doesn't cause too much trouble, the there is a much lighter, rural tone to the music. This was accomplished via the Media Location Controller system we had set up for the project, which you can see below.

As you can see, we had the ability to define what faction reputation to base this reactivity off of. Then, we could choose to play a different set of music based on the relationship with the faction, be it enemy, friend, ally, or neutral. These Media Location controllers were then tied to the Music Markers that were placed in the world. The Music Markers (see below) allowed us to define the radius and location of the music in the game.
I contacted Bethesda and Mark Morgan about including a selection of remastered Fallout 1 and 2 pieces in New Vegas, and all parties were fully on board. I also felt that some of the Fallout 3 tracks should make a return to help forge a synergy between all of the games in the series. It was amazing how well it worked out. The tracks that were chosen fit perfectly together and added the depth and scope that I felt was necessary. The music from the previous games acts as an homage to the lineage of the series. For example, most of Mark Morgan's music can be heard in the Vaults scattered around the wasteland, and the Fallout 3 tracks are mostly used in areas where there are references to military technology and the Brotherhood of Steel.
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