Good questions, Amalaki.
1. In the small universe, you are not making the sounds, Master Lin is, and you are hearing/feeling the vibration of that sound(s) in each area.
2.During those exercises and that mediation, it's the excess energy from all over the body, turning into smoke and leaving. If you use the Self-concentration exercise as a model, you can take time during any art of your day and visualize a specific area bringing in healing energy with each breath, and thanking the excess energy there, turning it into smoke and seeing it go back to the universe to be reused at a better time, place, or speed.
Much Love,
Shawn