It's sort of like LiveJournal in the way friends work. I post songs to my Catalog and then I can see all the songs my friends have posted on my Buddies page. I can also make playlists from my songs, like my Detroit area artists playlist for example.
SongBuddy doesn't host any mp3s, instead it uses mp3s that are made available by artists on web sites. To add a song, all you need is the address of the mp3. SongBuddy can then build a playlist for your normal mp3 player so that you can listen to all your friend's music with just one click.