Apple has just announced their heavily rumored radio streaming service, iTunes Radio live from WWDC 2013. iTunes Radio will tie directly into the Music app. The service will be free, but ad-based, unless you have an iTunes Match subscription, where you'll be excused from listening to ads.
iTunes Radio will allow you to browse stations as well as integrate features that allow you to create customizable playlists based on your likes. It will be available on all iOS devices as well as in iTunes in Mac OS X.
iTunes Radio will be available for free and be ad-based. If you're an iTunes Match subscriber, not only will you get it free, you'll also get it without ads. iTunes Radio will start off as being available in United States only with other countries at an unspecified later date. Most likely due to licensing issues.