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It lets you say how much you dislike a song you skip - and from that, and matching users across the database, it finds songs better suited to you.
The only thing I'm wondering about is how they pay for it - custom streams with lots of big label music, free, without adverts... and they pay royalties.
If you have a look - I recommend getting the flash player, the web interface leaves at least a wee bit to be desired atm.