1. Interactive Streaming:
The user chooses exactly what they want to listen to on the service and what songs are played next. For example, services like Spotify and Apply Music offer interactive streaming because you can pick and choose exactly what you want to listen to.
This generates both Performance royalties & Mechanical royalties.
2. Non-Interactive Streaming:
Essentially an online radio service where you cannot choose the songs that play next. For example, the service that Pandora originally became known for is considered non-interactive as you are unable to select certain songs and can only select stations.
This generates Performance royalties. (These are performances like radio, but digital. Thus, terrestrial radio and other radio-like services generate only performance royalties.)