NINJAM is open source (GPL) software to allow people to make real music together via the Internet.
Every participant can hear every other participant. Each user can also tweak their personal mix to his or her liking.
NINJAM is cross-platform, with clients available for Mac OS X, Linux, and Windows.
REAPER (our digital audio workstation software for Windows and OS X) also includes NINJAM support (ReaNINJAM plug-in).
NINJAM uses compressed audio which allows it to work with any instrument or combination of instruments.
You can sing, play a real piano, play a real saxophone, play a real guitar with whatever effects and guitar amplifier you want, anything.
If your computer can record it, then you can jam with it (as opposed to MIDI-only systems that automatically preclude any kind of natural audio collaboration1).