Uh, clarify?
I play the music on my winamp with the Shoutcast source DSP loaded. What that does is encode it to whatever I've told it to encode to and send the encoded data up to my shoutcast server running on this.. server, which you access through rmrk.net:8000. When you connect to the stream, you're connecting to this server, not my PC or my copy of winamp or whatever.
That way, even though I only have 256k upload, I could broadcast at 256kbps to like 30 people if I really wanted to. I just upload the "source" stream to the server, the server distributes it.