Spotify is an up and coming music player that relies on a combination of peer-to-peer sharing and server hosting to deliver the users choice in music, quickly. It's power lies in the fact that the user can specify what he or she listens to, as opposed to Pandora Radio, which allows the user to listen to a stream of music varying in artists and songs, though sticking to pre-specified styles or genres to suit the users taste.
There are pros and cons to both approaches. It is incredibly refreshing to be able to listen to full albums from your favorite artists before you decide to buy them using Spotify. Personally I have been listening to Goat Rodeo Sessions, Yo-Yo Ma and friend's newest album. Being able to listen to it repeatedly and not get sick of it has reinforced my desire to buy this album. I am also able to browse for specific songs, browse top 100 lists and listen to these whenever I want. This has been incredibly nice because I have never been one to remember who sings what, so I can *star* songs that I like, and be able to listen to them easy.
This is all fine and dandy, Spotify has filled a large gap that Pandora hadn't filled. The trouble with Pandora is that though you can train your radio stations to a high degree of success, sometimes it is nice to specifically select what you want to listen to.
All this being said, Pandora's pitfall is also its greatest strength. I find myself at work not wanting to constantly maintain a playlist, or search for new albums to listen to. More often than not I want to just listen to some good tunes by artists, or a group of artists that have similar styles that I can just listen to. Specifically when I am out running, Pandora has been spectacular. I can set it to Cake Radio, or whatever I want and just go. No fiddling with playlists, no falling into a rut of listening to the same loop, or even shuffle of 10 or 20 songs. Instead, I just tap and go.
For me, Spotify is spectacular, but it is not going to replace Pandora for me any time soon. It is a great supplement, for sure. It does have radio style functionality, the ability to manage all of your music on your computer and other neat features, but the simplicity of flipping on Pandora and going is irreplaceable.
Please note this is just my personal evaluation of the free versions of both software, and I really am a basic user. By that I mean I turn it on and listen without fiddling with all the bells and whistles, because let's be honest, I have far more important things to do than fiddle with a music player.