With all of these new apps, I can definitely see how it would be a possibly to eventually max out your iPhone's space, especially if you're using the first-gen iPhone. But luckily there is AOL Radio, which pretty much makes it so you can listen to any radio station across the US, plus a great grouping of online stations.
I'm telling you, people, I am seriously considering removing most of my iTunes library from the phone and just using these radio stations. Well, maybe not quite. But they are that good quality. It works like this: open AOL Radio--it's free, by the way--and you'll be asked if the app can use your current location. Select "Allow." Then, a list of all the radio stations in your area will appear. You can select one and it will start playing live for you. You can also check in on what stations are playing all the way across the country.
There are online radio stations to select from as well, so you can really key in on the genre you want to hear at the moment. Plus, there's a list of your recent stations and stations you've favorited.
My only complaint is that you can't do anything else on your iPhone while listening. All in all, great app to have! 
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