as far as I know, if you transmit anything in the uk, you may need a license. That said, as it's on the net, maybe you don't. The i-pod transmitters that you can use to send music from your pod to car radio for example, are deemed illegal in the uk but you can buy them on the net (and very good they are too!!). I'd check it out first.
Just read this in my local paper today. "Four people appeared at the the (local) crown court, charged with conspiracy to run a pirate radio station in the city." Don't know whether the same rules apply to Internet only but it might be worth investigating.
Get JetAudio,it has the ability to "stream" your own music.If you do start your own radio station online,you must satify the RIAA as a few of the stations I listened to have departed due to this organisations insistence on you paying out cash to "copy" the music to your hdd.