This is FREE, completely legal but subsidised by advertising.
From their own website:
we7 gives you great free music
we7 is an outstanding new music destination where you can listen to, share and discover music for FREE, legally and safely. You choose the music you want to hear and play full songs and albums online, on-demand at anytime. We also offer you the ability to buy the music you love in high quality mp3 downloads which you can play on iPods and most other digital players.
How it works
This is all made possible by we7's unique and significant "MediaGraft" technology that allows us to dynamically attach adverts to the beginning of each song you listen to. The "MediaGraft" technology also creates new, targeted, advertising inventory which links the emotional power of music, creative short audio adverts and digital display ads (such as MPUs) together in such a way that digital effectiveness measurements increase significantly. These adverts are targeted at you, the user; the revenue generated from these adverts goes to artists, labels and other rights owners. You get music for free and the artist gets paid fairly - everybody wins.