Hey guys, i'm fairly new to this Arduino and Processing thing. I can pretty much turn an LED on, off, blink, fade....and that's about it. I really would like to learn a TON more about it! And that's where i need your help. Can anyone give me some advice on using processing with the Arduino? One thing i had in mind was to set up 2 circles in Processing, so that when ever i moved my mouse over them, the corresponding LEDs on my Arduino would light up. Any tips? thanks! 
You might want to check out DANIEL SHIFFMANS book on "Learning Processing".
Fry's "O'reilly book" on "Visualizing Data" is pretty cool too.
look at my project:- http://www.thebox.myzen.co.uk/Hardware/Mini_Monome.html. While it is for a monome there are some test sketches in processing that interact with the monome in the same way you mentioned.
I can recommend the "Learning Processing" book too. Nice and clearly written.