The idea behind Project Playlist is simple enough. Allow users to search for music, then create custom playlists from their findings. Supposedly, all of this is able to take place legally and for free.
Sounds great, but this article from TechCrunch indicates that there may be some fuzzy areas with the licensing. Not that any much is played without permission, rather that there is a lack of music perhaps due to some of the details still being ironed out.
Honestly, as cool as this seems, I am a Pandora kind of guy. Slightly different service with the idea of music discovery in mind. Still, I think there is room for both services for the user looking to broaden their musical horizons.