Bluetooth has the Secure Simple Pairing (SSP) feature, and Bluetooth Low Energy has the LE Secure Connections feature, which both use Elliptic Curve Diffie-Hellman Key Exchange and therefore is protected against passive eavesdropping. The standard also includes the ability to support authenticated pairing for protection against Man-in-the-Middle attacks; if you've ever had to see if a 6-digit number matches on the two devices that are being paired, then you are seeing the authenticated pairing taking place.

Even though the Bluetooth standard includes these features, many products don't actually use them and simply transmit data without any encryption or authentication procedure. This is particularly a problem with many Bluetooth LE products.

You just get some hardware that can monitor the traffic like greatscottgadget's ubertooth one.

As for recreating the audio, you'd have to deal with capturing the key exchange handshake and cracking it.

Bluetooth supports solid encryption once paired, but the pairing is usually unauthenticated and thus subject to man-in-the-middle attacks.

Whether the encryption is implemented correctly and on (with strong enough keys) by default on most devices is another question of course.