So due to electron-electron repulsion, isnt it true that surfaces dont really 'touch'? If so, then how do two things rubbing each other give out sound due to friction? or is that because the uneven surfaces have different heights of electron layers and that's what collides?
How does anything happen at all if nothing "touches"? Things do "touch" when you consider electron repulsion. You just have to define what touching is. If things are close enough so that friction is an observable phenomenon, I would call that touching. Also, friction itself is also just electronic interactions too.
With all that being said, sound is produced when pressure waves propagate though the air. When these waves get to our ears we are able to hear them (provided the frequency is in the right range). So if rubbing things together causes the air molecules nearby to vibrate, then sound is produced. This is due to friction (electrical interactions) that vibrate the surfaces, which then vibrate the air molecules. This is independent of what we actually call friction or touching, since the electrical interactions are what are more fundamental.
We might think of a given pair of surfaces as being flat and smooth, but on a micro scale they are not. When two such surfaces are rubbed together, the very small convex projections on one surface get mechanically caught in the equally small concavities of the other. So although electrostatic forces on the atomic level prevent the two surfaces from "touching", on a scale length many orders of magnitude larger than that, they nonetheless engage and oppose sliding motion, and that engagement is what we measure as friction.
The shearing action of their relative motion then acts to either scrape the projections off or elastically deform them, storing up strain energy. At some point the elastic forces opposing the deformation become great enough that the surfaces suddenly unlock and slip past one another, relieving the pent-up stresses- and producing a sound wave. The process then repeats itself, many times per second. This "slip/stick" behavior is responsible for the squeaking sounds produced when surfaces are rubbed together.