The artists are paid by the incomes of advertisements (Ads) on the website and this each time their song played by a user. Every song you play is streamed, but you can download it by buying the songs on Amazon and iTunes in a snap. This generate even more income for the artists. But why would you download the song. You can play the songs online for free.
The library is amazing, you can find almost every song on Grooveshark. All songs around the whole world just a click away and... it's totally free! Searching for a song? Just type it in the search box and in less than a second you can play the song. You can even upload your songs to their server and earn money. You can even earn money with tagging songs. Beside its free that's what's made Grooveshark big. Everybody can listen to the songs that others uploaded. In fact it's a sort of online P2P (Peer to Peer) program of an new generation that is fully legal compared to other P2P programs. And of course all songs are DRM free. Still the most amazing for this platform is that it's all for free and 100% legal.
See what I mean on: groovesharks.org