The amount of light that fell on the photo resistor changed the resistance in the circuit. When more light fell on the photo resistor, it reduced the resistance in the circuit and this made the pitch higher. Less light increased the resistance and made the pitch lower. You may have found the optical Theremin a frustrating instrument since it can be difficult to move your hand just so to find the pitch you want to play. No worries, you can still use the Theremin to recreate some of the sound effects found in 1950s science fiction movies.
Now, let’s simplify the circuit a little more by removing the 10K resistor and the photo resistor and replacing them with a 50K potentiometer.
Rotate the 50K potentiometer all the way clockwise (until you can't turn it any more). Switch on the circuit and rotate the potentiometer counterclockwise until you hear a sound. Then continue to turn the potentiometer counterclockwise and you will hear the tone rise in pitch. Again, you are changing the resistance in the circuit and thus changing the pitch in the tone heard on the speaker. More resistance, lower pitch. Less resistance, higher pitch. A simple tone generator.
There is actually something interesting going on in this circuit. The 50K potentiometer is connected across pins 6,7, and 8. A resistor connected between pins 7 and 8 controls the "positive time interval" often labeled "R1" on 555 timer circuit schematics. A resistor connected between pins 7 and 6 controls the "negative time interval" often labeled "R2." In the following circuit, if the capacitor is 0.1uf, R1 is 10K ohms, and R2 is 100K ohms, the positive time interval will be about 7.62 milliseconds, the negative time interval will be about 6.93 milliseconds and the frequency about 69Hz. (Source: http://www.bowdenshobbycircuits.info/555.htm)
Why might it be interesting to be able to calculate the frequency of your square wave output? Let's make resistor R1 100k and resistor R2 113.3K and the capacitor 0.01uf.
The positive time interval will be about 1.47 milliseconds, the negative time interval will be about .785 milliseconds and the frequency will be about 440Hz. 440Hz is A4 on your piano and is a standard tuning frequency for musical pitch. You can use this 555 timer circuit to tune your guitar.
Before you try to tune your guitar it would be a good idead to test the 555 timer tuner to verify you are correctly generating a 440Hz tone (A4). I switched on my electronic keyboard and selected the square wave tone, switched on my 555 timer tuner and discovered that the tone it generated was F#4/Gb4 (369.994Hz) and not A4.
That's how science sometimes works, folks. You apply the theory, build the experiment, test the hypothesis...and get unexpected results.
While I troubleshoot the circuit to find out where the problem is, may I suggest you watch this video by Dr. Tae, the skateboarding physicist, titled "Can Skateboarding Save Our Schools?"Just in case video doesn't display here's the link: http://www.youtube.com/embed/lHfo17ikSpY