The service offers streaming audio of music that the user picks from a huge catalogue of (mostly) major label releases. Spotify isn't so much about discovery or social networking, like other streaming audio services. It's more like a library of music that users can access at any time, not to download and own, but to listen to.
The idea of streaming music, rather than buying it, downloading, and storing it, is becoming more and more popular, as broadband becomes faster and more ubiquitous. But the real jump in streaming audio comes when it becomes more accessible on personal devices like cell phones. And that's where Spotify is right now.
The Swedish music company plans to launch an iPhone app very soon. The big question is whether Apple will turn down the app's application, because it poses too much competition to the iTunes store.