Apple's iTunes News has a handy reminder up about the iTunes DJ feature and how it works with Apple's Remote app for iPhone and iPod touch (and we're guessing/hoping a new, iPad-optimized version soon as well).
The DJ built into iTunes lives at the top of Playlists in the left-hand column of the iTunes window. By default, it selects 15 tracks from your music library to start things off. Behind the scenes, it keeps track of the last five songs in rotation, and adds a new track to the end of the list each time a song has been played. At the bottom left of your track list, there's a menu that lets you choose any of your playlists as the source for new tracks. At the bottom right of your track list, the Settings button lets you adjust how many recently played and upcoming songs are displayed and whether you'd like higher-rated songs to be played more often.
The rest of the Settings panel underlines what a flexible and accommodating soul the iTunes DJ is. Not only can you drag tracks around and drag in new ones as the spirit moves, but any of your iPhone/iPod touch-carrying guests who have the Apple Remote app installed can also add new songs to the list. You decide whether they can request songs from your whole library or a particular playlist, and they also get a chance to influence what plays next by tapping the voting heart to the right of each track.
I must confess, while I use Apple Remote for iPhone a lot, I don't remember even looking at iTunes DJ since Apple introduced it, other than to write about it. Do you use it?