I love Spotify. It takes a lot for me to subscribe to something, and every month I find myself cashing in for another month of Premium Spotify. It's a beautiful, beautiful place.
Spotify allows you, even at it's most basic, free level, stream full-length, high-quality songs as if they were your own files.
It's revolutionary, as are their licensing agreements -- $.70 USD per song sale, and a cut of ad revenue for streaming. Spotify pays a royalty to every artist whose music is played, no matter if you're a multi-platinum artist, or an independent garage band.
You have two different ways to make money on Spotify:
First, Spotify is a streaming service. Users can stream your music either through a desktop application or through smartphone listening. When streamed, you'll be compensated by being paid a share of Spotify's ad revenue. This is calculated on an individual basis with a pre-set formula based on the number of listens your material has in a given month.
Spotify also allows people to buy your songs, exactly like iTunes. They've pre-negotiated the rate of $.70 USD per song, and that's what they pay every time you get a purchased download.
Spotify only works with aggregators (sort of like middle men between you and their system) so you'll need to find one that works for you. Try TuneCore (http://www.tunecore.com/) for starters.
According to Home Recording, "TuneCore offers a flat-pricing model for the submitting of your material, and handles paying you all royalties due. TuneCore charges $49.99 to place an entire album, or $9.99 for a single. You simply upload your song in the correct format -- uncompressed, 16-bit resolution, 44.1kHz sample rate .WAV -- and TuneCore automatically assigns a UPC code to your release, gives it a unique TuneCore ID, and gathers all necessary information from you."
Once your single or album is submitted, it takes about 6 to 7 days before Spotify has it live on their system. This is normal across the board, regardless of who you choose to do the distribution work for you -- once your release is delivered, it has to be sorted, compressed, and uploaded live to the service.