Now that many music download stores have switched over to DRM-free downloads and others are in the process doing so, apparently many free on-demand streaming music services including iMeem and LaLa have already abandoned DRM in their on-demand streams.  Instead, these services stream MP3 audio and use various measures to try prevent saving the streamed audio.

Last year, the major record labels tried pushing Congress to mandate the use of DRM on streaming radio, so it's quite a surprise to see no DRM used on most interactive music streaming services today, particularly services such as iMeem which is ad-supported and streams music from the major record labels.  As EFF mentioned, this means that there is no longer a plausible reason to enforce DRM on subscription based music download services either, since those who pay for a commercial based unlimited download service are no more likely to try pirating the audio than those who use freely available ad-supported music streaming services.  

The way the music is streamed varies from provider to provider.  With LaLa, the song is streamed as an MP3, relying on heavy use of "no-cache" headers and already expired date stamps to discourage the browser from caching the song.  iMeem on the other hand delivers the MP3 as an FLV soundtrack, which is cached as a randomly named temporary file.  This file is overwritten when the next song is played or deleted once playback has stopped.  

As these on-demand streaming services do not actually apply copy protection to their streamed audio, many stream grabbers that originally worked on capturing radio streams can be used with on-demand streams without breaking the DMCA's restriction on circumventing copy protection.  In fact, many companies that produce stream grabbing software claim that their software is legal since their software does not actually circumvent copy protection or DRM, since the raw audio stream remains unprotected.