A brief overview may be found here: http://www.appappeal.com/app/pandora
And while Pandora runs in your web browser, there's a standalone player that can be used for more functions, and so you don't accidentally close it :-)
Vista users can get a sidebar gadget: http://www.pandora.com/on-windowsgadget
XP users can use OpenPandora: http://getopenpandora.appspot.com/
Here's a lengthy article that describes all the work behind the scenes: http://www.nytimes.com/2009/10/18/magazine/18Pandora-t.html?_r=2&ref=magazine