There's a web API at The Echo Nest that includes a get_similar web service that allows you to retrieve similar artists to a set of seed artists. You can use this to help build playlists. The Echo Nest also has a set of web APIs that will perform a detailed analysis of a track (similar to the aforementioned Marsyas) that one could use as the basis for an acoustic-based song similarity method. (Caveat, I work at the Echo Nest). Of course, if you use iTunes, there's some canned solutions. iTunes now has a music recommender / playlist generator that will build playlists of songs from simliar artists. Similarly, the company Mufin has an iTunes add on which will perform acoustic analysis of your tracks and use this analysis to build playlists.
If you are interested in building your own music similarity system, I suggest that you take a look at the proceedings for ISMIR (the International Society of Music Information Retrieval). There's quite a bit of research around music similarity and playlisting that you'll find helpful. You can find the proceedings at ismir.net
