Their are a lot of online games on Byond, but why is it that so few seem to use music? Does it lag the server? What about sound effects?
Because a lot of games don't WANT to use music?
alot of games don't use music because music files can quickly make the files bigger to download by several megabytes. Even when using music files, alot of people stick to instrumentals and midi files, or ogg file types for size (bytes mega/bytes) efficiency.
As others have said, having music increases the download size. That might lag the server, but generally its not because of lag. When a song or sound effect is played, the server just tells the client what sound to play. The client has already downloaded the sound effect, its not like the game's server is streaming audio to all clients.

I think that most games don't include sound because it's just not essential. A game without sound might feel incomplete, but it's still payable. It's also hard to find good sound effects. People tend to not make their own so having sound effects from all different sources can sometimes be worse than having no sounds at all.
Another reason most games do not include sounds is because of its ability to be easily disabled. If the producers of such a game was to create, and use a sound, yet only two or three people out of the whole server was to listen to it, it would be a worthless addition.
In response to Dariuc
Having audio in your game does NOT bloat your rsc file. Decadence has 95 unique sound clips yet the rsc file is only 5MB.

What does bloat your rsc is stuffing in a bunch of uncompressed audio and full length songs.
Mainly it's because of increased download size with the issues of lack of functionality and the idea that most players won't hear it anyways.

So in total, 3 major reasons: size, ease of use, target audience.

size: With Audacity you can convert all music to .ogg format which is incredibly small but with very good quality. I've turned 2mb wav files into 40kb .oggs.

ease of use: I'm considering making a library for implementing sounds, including an interface file which includes a sound control panel. At first it doesn't seem like in game sounds or music can do all that much, but it turns out you can fade in, fade out, loop, reverse, speed sup and slow down any audio that byond can play.

audience: If players don't want to have sounds then that's fine, but perhaps when they first log into or play a game they could be notified of the music in the game, how to turn it on, and how to access the controls for modifying volume and such.

Most people keep their sounds off because developers often put loud or obnoxious sounds into byond, which really needs to stop, because otherwise byond may as well not have sounds at all with how everyone else puts them in.
In response to SuperAntx
What he said. and mostly the "full length song" part, will very quickly increase the file size of your project. Which is what I was mostly referring to.

Also i never said anything about the rsc file getting bigger simply because of sound being added to a project. I'm pretty sure I said something similiar to "files being downloaded" implying downloaded files. So I'm not really sure of the point of this post. It basically said the same thing I just said o_O