Favorite lists are personal. However, a group of users can share specific favorite lists
. The effect is that users can stream from (and contribute to) shared favorite lists. Read more
Does the program as well as the music files need to be on the same computer ?
Yes. You cannot have AmpJuke on one server (ie. your ISP-server) and music on another (ie. your home computer).
However, it is perfectly legal (in this context) to have AmpJuke installed on f.ex. a harddrive and all your music files residing on f.ex. an attached USB-drive.