Mosoto Remix adds a little widget on your profile that shares the music you and your friends are listening to. Within the widget you can upload full songs, create playlists, and see the most recently uploaded/played music from your friends. If you hear something you like, you can also add songs from your friends to your own account or buy it from iTunes. It’s essentially a specialized implementation of the Box.net widget, which provides the storage for all the files. Their canvas page also lets you chat with other Mosoto users.

Remix walks a gray line by giving users the ability to upload and play back full songs, although they don’t allow downloads. Facebook music applications from startups like Last.fm (70K+ users) and the incredibly popular iLike (3 million+ users) service restrict playback length or order. There are a couple other music widgets on Facebook as well. Audio (500K + users) and Boombox (17K users) also allow members to upload songs and create playlists.

Audio’s large user base has upped it’s profile and caused it to respond to allegations of piracy. In a note to his users, the developer of Audio denies being a “digital anarchist”, saying “I’m a good friend of the music industry, and someone trying to help come up with ways for it to grow. I truly believe that the sort of socially-integrated audio experience that Audio can offer will lead to the future of the music industry – both in terms of relevance and revenue.”

However, other music services have had to pay for the privilege of playing full copyrighted songs. Lala expects to fork over $143 million in the next two years for royalty fees. Pandora had to shut off international access because of licensing issues. With both systems playing by a separate set or rules, it seems inevitable that the pay to play and free movements will clash, with Facebook in the middle.

The chat client controls most of the action, listing which of your Facebook friends, friends of friends, and Facebook networks you’ve joined. By hovering over the names, Mosoto alerts you to the similarities between your profiles. If you find someone that looks interesting, you can befriend and poke them right through the chat window. Chatting is one on one, with groups of friends, or even all of your friends within a network.

From within the chat roster, you can share files with your friends using a free 1GB Box.net account. You can share and open files like pictures, songs, and videos using their in-browser file list and file viewers. The most interesting type of file sharing Mosoto does is with music. Mosoto lets you upload songs into your Box account and string them together in play lists your friends can play through and remix. The music player lists all the music and lists your friends have, and lets you mix songs from your friends accounts into your own play lists.

Mosoto is looking to release in the middle of March, but is still taking beta testers through their Facebook group. The project is self funded and was created by a of a team of five recent University of Arizona graduates: Girard Kelly, Seth Lesky, Louis Tran, Srinivasan Chandrasekharan, and Paul Chung.

See the video below for a great overview of the product, with the cheesiest background music ever.