A novel technique for the localization of stimulated Brillouin scattering (SBS) interaction is proposed, analyzed and demonstrated experimentally. The method relies on the phase modulation of two counter-propagating optical waves by a common pseudo-random bit sequence (PRBS), these waves being spectrally detuned by the Brillouin frequency shift. The PRBS symbol duration is much shorter than the acoustic lifetime. The interference between the two modulated waves gives rise to an acoustic grating that is confined to narrow correlation peaks, as short as 1.7 cm. The separation between neighboring peaks, which is governed by the PRBS length, can be made arbitrarily long. The method is demonstrated in the generation and applications of dynamic gratings in polarization maintaining (PM) fibers. Localized and stationary acoustic gratings are induced by two phase modulated pumps that are polarized along one principal axis of the PM fiber, and interrogated by a third, readout wave which is polarized along the orthogonal axis. Using the proposed technique, we demonstrate the variable delay of 1 ns-long readout pulses by as much as 770 ns. Noise due to reflections from residual off-peak gratings and its implications on the potential variable delay of optical communication data are discussed. The method is equally applicable to the modulation of pump and probe waves in SBS over standard fibers.