While the Recording Industry vampires representatives fret and shake over the shiver of the state of illegal music downloads, there is plenty of legal and willingly shared free music out there on teh inter-web.

Case 1: Dictionaraoke
The venerable Dictionaraoke is back up and running, with its music newly hosted over on archive.org. The basic premise is that nefarious (bored?) individuals take a song (generally as a sampled MIDI), and re-add words to it as spoken by the pronunciation guides in online dictionaries. The results vary between vaguely disturbing to hilarious. Of particular note is the cover of Astrud Gilberto's muzak classic, the Girl from Ipanema (with its bizarre last verse about the Girl with Emphysema), and a sublime cover of Underworld's Born Slippy.

Case 2: IUMA
The Internet Underground Music Archive has been an absolute goldmine for free music for a good long while. It's a giant repository of hundreds of unsigned artists. I don't even know how to give a hint as to where to start looking for music in their archive - just pick a genre you like and go nuts. By-and-large the music quality is excellent and I've downloaded numerous albums over the years ;)

Case 3: JBT@archive.org
The John Butler Trio have an archive of their live gigs hosted with those folks over at archive.org. If you haven't heard of JBT before, the band is basically a completely independently managed and run group; if I were to give it a crass categorization I'd say it was 'folk rock' but really it defies description. Give it a listen you'll understand why I'm addicted :)