Pandora is great about bringing forward artists who have not found wide release, and I find the program easier and more intuitive than last.fm. However, Pandora playlists have a tendency to "bleed" into each other. I have very eclectic music tastes, but that doesn't mean I like to listen to everything all together. I like Counting Crows and Katie Melua equally, but I don't want them playing one after the other.
A couple of days' sampling suggests that last.fm does a better job of keeping distinct voices separate.
By the same token, Pandora seems to recommend based on the sound of a piece much more than the genre that the artist is identified with. Last.fm seems to group more by genre. I guess it depends on which way of grouping a listener prefers.
What I love about both is the ability to discover new artists, voices, sounds. I've discovered lots of great songs through Pandora. I expect I will with last.fm.
I do really like that last.fm gives me information like artist bio, tour dates, etc., and that I can play an artist's song on demand.
As for Internet radio, I love it, and have enjoyed it for a while. I really like WFUV out of New York and Live Ireland out of Dublin. Both have great songlists. My favorite source for finding new Internet radio stations is actually the easiest: iTunes. It's all built right into the iMac system and couldn't be easier (same is true for subscribing to podcasts, another thing I love about iTunes).
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