The service was announced at this year’s E3, including linking up Facebook and Twitter to Live.  Apparently the Last.Fm service will be free but contain ads for Gold accounts, and there will be 3 hour trials for Silver users.

Silver users will be able access what we’re considering a trial period of three hours a month, which comes with video advertising. Gold users will have unlimited ad-supported access, so they can use it 24 hours a day. There will also be a premium offering on a subscription basis from Last.fm, that will be commercial free and will also have more sophisticated personalization features, like Loved Tracks.

-Christina DeRosa, general manager with XBL

The premium service is an additional subscription fee that will be paid directly to Last.fm.  Using the service via Live will still require a registered Last.fm account.  Check out the whole article.