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Difficult to explain... When you listen to music on your computer or your iPod, a plugin gets tracks you listen to, and then creates statistics with it (artists you listen the most, tracks you listen the most, etc). You can also tag the music (put a category), and then it'll create statistics with the music.
Then, after a time, the program find people that have similar tastes, recommand you bands that you should like, creates you a personnal radio, things like that...
A last.fm group mainly allows to have statistics for a group of people, but you have to be at least 15 people in the group to have statistics...
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