This application is a "scrobbler". That means that it watches the music you play on your phone and sends the song information to Last.fm. Based on what you listen to they recommend new music. Visit their web site for details.
This works with the default "Music" app on most Android phones, and some other music apps that have an option to work with Scrobble Droid.
Updated to work with the Music app on Android 2.3 (Gingerbread). Sorry this wasn't fixed earlier.