The service took one step toward wider distribution today when Apple (AAPL) approved its iPhone app (for a glimpse of the app, see the video at the bottom of this post). But that won’t help U.S. users until the big music labels–Warner Music Group (WMG), Sony (SNE), EMI and Universal Music Group–agree to American distribution deals.

But before we get to that, let’s back up and explain what Spotify is: A streaming-music service that lets you listen to whatever you want whenever you want, as long as you have a Web connection. A free version comes with ads, and if you want to do away with those, you can pay for a subscription.

Does that sound familiar? It should. There are plenty of models like this available in the U.S. right now, from RealNetworks’s (RNWK) Rhapsody to MySpace Music, a joint venture owned by News Corp.’s (NWS) social network and the big labels. For various reasons, equivalent (and legal) models have been much harder to come by in Europe, which explains part of the appeal there. The other explanation is that Spotify works beautifully.

But don’t take my word for it. Ask Slate.com columnist Farhad Manjoo (“The best streaming music service in the world”). Or better yet, Facebook CEO Mark Zuckerberg (“Spotify is so good”).

Meanwhile, investors–primarily European ones–have been throwing money at Spotify, and the big music labels’ international arms are enthusiastic partners (and equity shareholders). And the company’s boosters have been pointing to a U.S. launch as early as the fourth quarter of this year.

So let’s assume this happens. What then? The problem with the digital music business, as company after company has found out, is that it’s a miserable business:

• Selling music by the track is a low-margin affair that only works if you have enormous scale–Apple sells some two billion songs a year.
• It’s been nearly impossible to get more than a few hundred thousand people to pay a monthly fee for music–ask Rhapsody or Best Buy’s (BBY) Napster, which have been slogging away at this for years without gaining any traction.
• And it’s been impossible to support a free service with advertising while ponying up big licensing fees to the labels–ask Imeem, et al.

So why will Spotify be any different? Depends on whom you ask. Some figure that it has the best chance of working as a mobile service and that since phone users aren’t used to the idea of getting all the music they can eat on their phones for free, they’ll pay up if given the chance. Others think the big labels have gotten wiser and/or more benevolent about their licensing fees and are willing to wring less out of Spotify at the start in the hope that it will pay off down the road.

Still others just shrug and figure it will work out somehow because…well, one of these days, someone has to figure out how to make this work. “Everybody loves the product,” says an industry executive familiar with the company’s plans. “And there’s a hope that the business model is realistic.”

I have heard rumbling that not all of the big labels are equally enthusiastic about a U.S. licensing deal. It’s unclear whether that’s due to something specific about the U.S. market or to internecine squabbles at particular labels. But Spotify will need at least three of the big four to play along. And then we can see just how realistic the model really is.

I ask this because while Amazon has said it won’t repeat what it did last week, it hasn’t actually sworn off remote book-removal–or  remote anything-removal, for that matter–altogether.

Which means the e-commerce giant can do it again.

On Friday, Amazon told me that it yanked the George Orwell novels from customers’ e-book readers because they were “illegal”–bootlegged copies it never should have sold in the first place. “We are changing our systems so that in the future we will not remove books from customers’ devices in these circumstances,” the company said in a statement.

See the problem? It’s the, big, gaping “in these circumstances” loophole.

I’m still holding out a tiny bit of hope that Amazon (AMZN) is never going to delete a book, or anything it sells its customers, ever again. And that its oddly worded nonpromise is just an oddly worded nonpromise.

But I’ve repeatedly asked Amazon PR folks to mollify me, or at least spell out the circumstances in which they would delete a book again, and I haven’t gotten any response. So I’m fearing the worst: Amazon reserves the right to yank books out of your Kindle, but won’t tell you why or when until it happens.

If you want to play devil’s advocate, you can note that other e-commerce companies have similar abilities. Apple (AAPL) has disclosed that it has a “kill switch” that allows it to remotely wipe out apps from iPhones, ostensibly for security reasons.

And theoretically, the ability to wipe out a rogue iFart app should be as disconcerting as the ability to make a book disappear–intellectual property is intellectual property. But it just doesn’t rankle in the same way.

What to do? Slate columnist Farhad Manjoo wants new legislation to tackle the problem. But even if you like that approach, it’s not going to happen anytime soon–our lawmakers have full plates these days. My suggestion: Demand that Amazon, Apple or whoever else has remote access to your gadgets spell out exactly when, if ever, they will forcibly take back what they sold you. Or don’t buy from them at all.

No need to go on about my lack of interest in this forced marriage, which the consumer electronics business has been trying to make work for more than a decade (see the 1993 Time cover to the right). Slate’s Farhad Manjoo has done it for me. If you’re pressed for time, the title will do: “I don’t want my Web TV.”

Here’s what I do want: The ability to use my TV to watch all the great video the Web makes available–actual TV shows and movies like “The Office” on Hulu, “Lost” on ABC.com, “No Country For Old Men” on Netflix’s (NFLX) on-demand service. Which is where Boxee comes in.

The New York-based start-up makes elegant software that cobbles together offerings from all of those services, plus many more–with whatever media you have stored on your hard drive–and serves it up to you on your big screen, with a minimum of fuss. Right now it’s a niche product–it only works on PCs running Linux, or Apple’s (AAPL) Mac mini and AppleTV boxes–but that should change soon.

It’s slick stuff, and when you get a chance to watch it in action, it’s the first time that all those anecdotal stories about people dropping their cable TV subscriptions and just watching Internet video finally make sense: Why pay for cable stations you don’t want when you can watch just about everything you do want, on demand, for free?

This is also why I’m not sure how long the big cable companies will allow Boxee to operate unfettered. As the recent dispute between Time Warner Cable (TWC) and Viacom (VIA) illustrates, the cable operators are increasingly dismayed about paying the cable networks big fees for their content, only to find them giving it away online. And with Boxee providing customers with a real opportunity to drop cable TV in favor of a broadband connection, I worry that it’s a matter of time before they find some way to throttle the company.

Technically, the cable guys (and the telcos, who are also in the TV business) aren’t supposed to be able to do anything about Boxee. They’re just supposed to act as a dumb pipe serving up high-speed Internet access and keep their mouths shut. In the real world, I don’t think that’s going to fly. See: The many bandwidth caps the cable guys are starting to experiment with, which are aimed at heavy Web video users.

Boxee founder Avner Ronen disagrees, of course. He thinks the cable guys will want to work with his company (he plans to make money by licensing his software to gadget makers and extracting fees from content providers like Netflix, but that’s all down the line). And maybe he’s right: When I dropped by his CES booth on Friday, he was being swarmed by emissaries from CableLabs, the cable guys’ tech consortium. They were the third group of cable execs to visit the company that day.

I’ll let Ronen make his case in the video below; and I’ve also included a brief demo video from the company. But that clip doesn’t really do Boxee justice. Ask one of the 100,000 super-early adopters who are using the software themselves. Or any of the nervous cable guys who saw it last week.