Yes, that's right... you can do it, and it's free and legal!
There are many different "apps" (applications) that let you do this. Services like Slacker, Spotify, and Pandora are very commonly referenced.
So too is "Jelli"- http://www.jelli.com/ isa bit different ,but seems interesting because you get to influence what's played by voting.
Take a look at the links below for more information about "streaming radio" or "internet radio" if you wish additional background on this interesting way to use the technology you already have.
http://www.makeuseof.com/tags/internet-radio/
http://www.makeuseof.com/tag/jelli-radioactive-free-music-streaming-site/
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