Is there any algorithm with which I can automatically create a playlist of songs that well with each other -- similarly to services like iTunes Genius -- that a single developer can actually implement? It should either a) not require any sort of remote database of listening habits etc. or b) require such a database, but work with one that is freely available.
i did this, and i used the last.fm database as described by tomasz. i didn't use "related artist" directly, but instead constructed my own relationship graph by comparing tags associated with different artists (this is not the approach suggested by lcfseth btw - i have quite a large range of music and i wanted to explore "natural" connections that might not be common partners in "normal" playlists; also i wasn't sure how uniform the related artists were).
i also used a local database to cache data from last.fm, because calls to the api are rate limited, and i experimented with using other parts of the api to improve / normalize the information i was reading from mp3 tags.
generating a useful graph of related artists was actually quite hard; largely because some nodes in the graph naturally tend to be more important than others. if you don't "even out" the graph then your playlist will keep returning to the "important" artists.
the final result did work well, in that the selection of music had a good balance between "central theme" and variation. but the implementation is not at all polished, the calculation of the graph can take a long time (many hours), the program takes up a fair amount of memory when running, and it still seems to play elvis costello a little more than expected ;o)
if you are interested, the code is at http://code.google.com/p/uykfe/
the best part of all, from my point of view as a user, is that it can update logitech media server (squeezeserver) playlists in "realtime", adding a new track whenever the list is empty. that works really well in continuing from whatever music you select "by hand". it can also generate one-off playlists, of course, and, finally, by tweaking parameters you can get a kind of "random walk" through your music collection - it will play related tunes but slowly drift from one style to another (in fact, this is really the "default" mode - to get it to stay on a single theme i needed extra logic that biased it towards whatever music it had played earlier).
ps also, the dump of the final graph to gephi was really cool - i had it printed out and it's now pinned to the wall...
pps i also experimented with the musicbrainz database, which in theory sounds like a fantastic resource. but in practice it is over-complex and poorly documented.