There's lots of free and legal music online, once you know where to find it. Free Music Downloader & Player lets you discover and download free music, audiobooks or podcasts, you can then listen to them right on your iPhone or iPod touch.
Here are some of the best sites:
Jamendo is a community of free, legal and unlimited music published under Creative Commons licenses. There are 319,678 free music tracks on Jamendo.
Free Music Archive
The Free Music Archive is an interactive library of high-quality, legal audio downloads. There are over 22,000 tracks available.
Internet Archive's audio and MP3 library contains over 200,000 free digital recordings ranging from alternative news programming, to Grateful Dead concerts, to Old Time Radio shows, to book and poetry readings, to original music uploaded by our users. Many of these audios and MP3s are available for free download
ArtistServer is a social music site with a focus on independent artists and bands. It offers 10,000 mp3 downloads by more than 8,000 artists.
Last.fm's Free Music Downloads
Last.fm is a music recommendation service. Last.fm has a vast free music collection consists of MP3 songs of worldwide origin.
Audiobooks on LibriVox
LibriVox is an online digital library of free public domain audiobooks, read by volunteers. It has a catalogue of over 4,500 unabridged books and shorter works available for download.