for starters i would keep it ad free. but once it picks up momentum and you are getting a lot of visitors, i would maybe incorporate a video advertisement in between songs. so maybe after 5 songs it would display a video/audio advertisement of some sort etc.
I think I want to stay away from interrupting listening. I know there free so complaining is kind of pointless and lame, but I cant stand it in other music services. I might look into a service like http://carbonads.net/.