Watch the Forbidden Village online guitar lesson by Jason Loughlin from Essentials: Surf Guitar
This tune starts off with an E6/9 chord and then adds the major 7th. We'll walk this down to a Baug7 and back to E. I'm altering the IV chord by adding a dom7 and b5. Next, I'm following the melody with the major chord shape. This brings the chord up to F, so when I add the B to the chord we get a Lydian sound.
The turnaround can be looked at a couple ways. You can see it as Gaug7 to B7 or look at Gaug7 as an inversion of an altered B7. If we were to think of it relating to B7, it would be spelled from bottom to top: b5, Root, 3rd, and #5. The second section starts on an Eb major chord. This is the beginning of a chromatic progression to goes as follows: Eb, E6, Eb+, E6, F, E, Eb, D, and Emaj7. Everything with the exception of the last chord is a half step away from each other. The trick is finding a melody that helps connect them in a way that makes it less obvious.