Sound sensitive microphone to LED...

Sorry mate, I don't know how I missed that.
Anyway , here is a description of how to use your board:

High sensitivity; The module has two outputs: AO, analog output, real-time output of the microphone voltage signal / DO, when the sound intensity reaches a threshold, the output high and low signal threshold

  • Sensitivity potentiometer adjustment. Uses 5V DC power supply; with power indicator Dimensions: 1.69 in x 0.63 in x 0.51 in (4.3 cm x 1.6 cm x 1.3 cm) Weight: 0.18 oz (5 g)

The potentiometer sets the threshold digital output level. I've never used it but if I had to guess , I would say that if you want to record or measure low level sound you set the pot lower. If you want to measure louder sound you set it higher. The purpose of the digital output D0 is to tell the uC that the sound is at the chosen level , hence it is a trigger line out to tell the uC when to begin sampling and storing the sampled data to an SD card.

You need to calibrate you setup mate.
Get a radio or cassette and increase the volume while you play with the pot. Set the radio to a level equivilent to the level you want to trigger the lights and leave it at that level, then gradually increase the pot on the board CW until the led lights up.
Then it should be ready to run code. If your code works when you start the program with the volume turned down, nothing should happen. When the volume gets to the calibrated threshold , the D0 (dee zero) should go high and your arduino should start turning on lights or whatever. Give that a try.. Here's the link:
http://insanesupply.com/Insane-505135533
The chip is an LM393 dual comparator used for the level detector. That chip can't supply very much current so the code you're using would be fine except for the fact you are not using the D0 output for a digitalRead. You need to let the board tell you when
the level is high enough instead of using the analog to look for 2.5V, First of all mate, it's audio. You can't connect to it directly.
you need a 1uF cap and I didn't see that. I saw 6 resistors , four of which are probably part of the threshold detector circuit and the other two look like they are current limits for the leds (if that's what those are (low level and high level ).
Put a 1uF cap between A0 out from the board and the arduino A0 in. Audio is going to be very low level , maybe 1V pk to pk. I didn't see an amplifier on that board the chip is a comparator not an amplifier so good luck measuring 500 with your analog input. I estimate the highest value you'll see is 200. If you decide to build an audio pre-amp with op amps I can help you with that. I have a schematic I can post if you need it. Or you could get this:
http://www.ebay.com/itm/LM386-Audio-Amplifier-Module-for-Arduino-Raspberry-Pi-/221423330883?pt=LH_DefaultDomain_0&hash=item338ddbe643
or this:
http://www.ebay.com/itm/LM358-op-amp-operational-amplifier-signal-amplification-module-for-Arduino-/270955305006?pt=LH_DefaultDomain_0&hash=item3f1631d82e