There are two groups of people in this thread who a really rubbing me up the wrong way:
1) those who claim they are in the music business and don't like Spotify;
2) those who are praising Apple for their Christian actions.
In the case of 1, take it up with the labels. Ask them to stop making deals with Spotify. If it really is unsustainable, the deals will stop and Spotify will be dead in the water. If your label is letting people stream your music for diddly squat, take it up with the intermediary in the whole picture.
In the case of 2, Apple is not trying to save the music industry or do what is right. Apple wants to remain the most popular player in the market. If Spotify has a bad business model, labels will not do deals. If labels are doing deals, then for Apple to badmouth a legitimate service is ridiculous.
I'm a university student in the UK and (to the best of my knowledge) Spotify is used by most of the student body on a regular basis. It's far more flexible than iTunes when you have friends round, because for 99p you can construct any sort of playlist you want... including lesser-known artists that don't fit into iTunes' mainstream ambit.
I have friends who like classical music, but I certainly don't have any classical albums on my computer. Spotify really does come into its own. It certainly encourages people of my age to keep away from file sharing, so the model works for us. Does the model work for the industry? At the moment, yes... or surely Spotify would not have any content.
FWIW, I use both iTunes and Spotify extensively. iTunes houses my collection of music and I do buy albums quite regularly. Spotify (and Last.fm) let me check out and experiment with new artists, in addition to providing a huge library of content to cater to my friends' tastes.
NB: Recent popular releases often aren't always available on Spotify Free for some while. To listen to mainstream album releases you have to use a Premium service.
Edit: As an observation, there seems to be a split between Europeans (who have and support the service) versus North Americans (who think it's hell on earth). I wonder why that could be.........