Hi Blink, adaptive music is fairly common these days in video games - in it's most basic form (as I'm sure you've noticed) it could simply be triggering boss music, or increasing the tempo of the music when running out of time (such as in Super Mario).
Banko-Kazooie and Ocarina of Time are two games that made very early use of adaptive music and I always wondered why more games at the time didn't - I suppose you could call them pioneers.
A great example of very effective dynamic music is Splinter Cell: Chaos Theory. This was made using the technique mentioned above by others, by layering up several versions of the same piece, and fading between them depending on the current game state, or situation.
This approach is convenient and fairly simple to implement, as all it requires is several different variations of the same piece, at the same tempo, and the ability to crossfade between them.
Here's a clip of my own work using this technique: https://soundcloud.com/boneyardaudio/adaptive-example/s-ipKcT
You can hear the game state transition from 'calm', into 'enemies', into 'hiding', and finally into 'boss' (the clip isn't 100% perfect but should give you an idea).
The other technique for creating adaptive music is to create many short clips or sections (for example, passages that are four bars in length) and allow the software to string the sections together to make up the music. Each clip may be categorised as either 'A' or 'B', for example, and the game engine can be told to select and play clips from either category in sequence e.g. A-A-B-A-A-B. This way, the soundtrack will be non-linear and different every time, but remain structured.
When the game changes state (say, from 'calm' to 'stressed'), the audio engine can also decide to change to a new set of music clips that relate to the new state, and may play a transitional clip (e.g. a two bar section with a drum fill and build-up) that leads into the new state.
Once the game state changes back to 'calm', the engine can play another transitional clip and return to it's original set of 'calm' music sections. Note that there is only ever one layer of music playing at a time (apart from crossfades that may be necessary to retain reverb tails for smooth transitions between sections).
I believe 'Tomb Raider: Legend' used this technique (although I've not played it) but I'm not aware of any other games that have.
Audiokinetic WWISE is a great (free) tool that allows you to do either method of adaptive music. They have a great online resource section as well, to help you learn how to use the software. Worth a look.
Feel free to PM me if you want to chat further. By the way - a tracker is a type of DAW that was very popular in the 90s.