I love both. I can't listen to Pandora anymore (in a convenient manner at the very least) because I live in Canada. Last.fm is interesting because it proposes groups that need not to be of similar genres, but instead please common listeners. That means that most Quebec metalheads flood the service with mainstream reggae groups. Listen to Iron Maiden or Metallica, and Bob Marley is sure to pop up at some point.
I liked Pandora because it allowed me to discover less known groups based on the empirical measure of my music tastes. For example, Gorillaz + Hamster Alliance + Dream Theatre led me to Telegenetic, RJD2, Casiopea and El Ten Eleven, which is a path I absolutely love and couldn't have taken on my own.