You may or may not have heard of the up and coming service Turntable.fm recently, but if you haven't I'll start by simply saying, "Check it out!" Essentially, it's a series of chat rooms that have people "spinning" music for their fellow DJs and the audience (chat room participants) to listen to. Anyone can be a DJ and take one of the 5 open slots when they're available in an established room (or create your own for you and your friends), pick songs from a media library (or upload your own), and work with your fellow DJs to create a custom mix for your audience. It's like listening to a music channel as curated and chosen by your friends or people you get to know through the service.
I've spent a lot of time in the Decoy Music Turntable room as a DJ, spinning new hardcore and metalcore for fellow heavy music lovers from Decoy (and some facebook friends). For such an amazing and addicting service, when you think about it, it's really a pretty simple concept. Take a chat room, mash it up with the ability to play music that the group can listen to together, add a voting system to keep from having too many Rick Rolls, and boom--that's Turntable.
There's a number of reasons I see this formula succeeding. First, there's the game aspect of it all. If you get a chance to hop in a DJ slot, especially if there's a decent crowd in the room, you're going to want to play songs the crowd will like for two reasons--first, so you don't get your song lame'd and look like a fool for what you chose to play and, second, so that you can get "points" for having people love what you're playing. As your points accumulate you are allowed access to new avatars which sets you apart from the masses, showing you have more clout than regular users. It's not World of Warcraft, but the "level up" concept is in full effect.
Building on the game aspect is the social aspect. Everyone in a room can chat as well as vote on the songs being played. When you note a song as being "awesome" your avatar starts bobbing along to the music, so fellow people in the room can see what you're digging. And with the chat room mentality you get both the good and the bad that's always been associated with it--a superb social environment to talk about whatever by people who are in the same room because of a shared interest, but also a forum for people to just be dicks if they want. The latter is somewhat kept in check by each room having a moderator that can boot people who misbehave.
Lastly, even if you don't care about playing the game or socializing, Turntable presents a great alternative to Pandora, Last.fm, and other algorithm-driven internet radio. Instead of having a program choosing what songs are similar to what you want to hear, there are a group of people putting together what they think fit a genre or theme or group of people best. Add to this that right now there are no limitations on what songs can be played (remember, you can upload your own music), the variety is, essentially, infinite. Whereas other services are relegated to what's in their catalog, Turntable isn't, and for genres that don't have a lot of variety on internet radio stations, such as dubstep, Turntable has become the go-to place to listen to music.
Assuming the record labels or RIAA don't have the service shut down or it isn't acquired and neutered by a large media company, and if they buff up the rough edges (ie: they need multiple playlist support, mobile apps, non-mp3 file support, and some other small things) Turntable will be a hell of a competitor to other internet radio options. Right now, I've already given up listening to Pandora and Last.fm for my internet radio and go straight to my favorite Turntable rooms.
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