A method of analyzing properties of rock in a formation in real-time during drilling, and receiving, over a borehole telemetry system, acoustic characteristics data from a downhole processor assembly by a surface computer, the acoustic characteristics data providing one or more acoustic characteristics evaluated from an acoustic signal provided by one or more acoustic sensors positioned adjacent a drill bit generated real-time as a result of rotational contact of the drill bit with rock during drilling, wherein the acoustic characteristics data received by the surface computer is real-time acoustic characteristics data derived by the downhole processor assembly, the method being characterized in that the acoustic characteristics data comprise mean frequency and normalized deviation of frequency; and performing the following processing steps at the surface computer: identifying lithology type of rock being encountered by the drill bit utilizing mean frequency and normalized deviation of frequency evaluated from the acoustic signal, wherein the step of identifying the lithology type includes the steps of: comparing the mean frequency and the normalized deviation of frequency of the rock undergoing drilling with mean frequency and normalized deviation of frequency of a plurality of rock samples having different lithologies, the mean frequency and normalized deviation of frequency being examined together as part of the step of comparing to thereby determine an amount of correlation of the acoustic characteristics data associated with the rock undergoing drilling and the acoustic characteristics data associated with the rock samples; and identifying the lithology type of the rock undergoing drilling responsive to the step of comparing, and deriving petrophysical properties of rock being encountered by the drill bit utilizing a petrophysical properties evaluation algorithm (304, 304A, 304B) employable to predict one or more petrophysical properties of rock undergoing drilling utilizing the acoustic characteristics data. identifying lithology type of rock being encountered by the drill bit utilizing mean frequency and normalized deviation of frequency evaluated from the acoustic signal, wherein the step of identifying the lithology type includes the steps of: comparing the mean frequency and the normalized deviation of frequency of the rock undergoing drilling with mean frequency and normalized deviation of frequency of a plurality of rock samples having different lithologies, the mean frequency and normalized deviation of frequency being examined together as part of the step of comparing to thereby determine an amount of correlation of the acoustic characteristics data associated with the rock undergoing drilling and the acoustic characteristics data associated with the rock samples; and identifying the lithology type of the rock undergoing drilling responsive to the step of comparing, and comparing the mean frequency and the normalized deviation of frequency of the rock undergoing drilling with mean frequency and normalized deviation of frequency of a plurality of rock samples having different lithologies, the mean frequency and normalized deviation of frequency being examined together as part of the step of comparing to thereby determine an amount of correlation of the acoustic characteristics data associated with the rock undergoing drilling and the acoustic characteristics data associated with the rock samples; and identifying the lithology type of the rock undergoing drilling responsive to the step of comparing, and deriving petrophysical properties of rock being encountered by the drill bit utilizing a petrophysical properties evaluation algorithm (304, 304A, 304B) employable to predict one or more petrophysical properties of rock undergoing drilling utilizing the acoustic characteristics data.