I am still really new to SW
stuff, so someone with more knowledge than I correct me if I'm wrong, but it is my understanding that live rock acts as one huge bio filter. The rock itself is very very pourus and provides lots of space for bacteria to grow that eat amonia and nitrites. Also because of the pourus nature of the rock the middle parts don't get much water flow so bacteria form inside the rock that will break down the nitrates.
As far as just going to the beach and picking stuff up to put in your tank, I have read warnings about doing such things as the beach is often contaminated with lots of debris and waste that would be harmful to a SW
If it is the price of the rock is what you are concerned about you can check out Garf.com I think, and they have plans for making your own live rock out of concrete and aragonite sand.