When you turn on the iTunes Genius feature, it sends information about the songs in your iTunes library to a central server. The server stores all the information that it collects from Genius users in a database. When you activate Genius in iTunes, it compares your music collection to those of other users with similar tastes in the database, and then uses that comparison to decide which songs in your library go together.
To create a Genius playlist, right-click a song in your iTunes library and select "Start Genius." Genius decides which songs go together well with the song you choose and then puts them into a list. If you like the songs that Genius has put into the playlist, click the "Save Playlist" button; if you want Genius to use a different set of songs, click the "Refresh" button. Change the length of the playlist that Genius creates using the "Limit To:" drop-down menu. You can sync Genius playlists to an iPod.
Unlike Genius playlists, which are based on a single song, Genius mixes are based on genre tags. To see Genius mixes in iTunes, click the "Genius Mixes" link in the iTunes sidebar. iTunes displays nine montages of album covers, each representing a different genre or sub-genre. Double-click one of the montages to open the Genius mix. iTunes requires at least several hundred songs to be in your library before it can create Genius mixes; if the "Genius Mixes" link doesn't appear in iTunes, add more music to your library, then click "Update Genius" in the "Store" menu. As with playlists, you can sync Genius mixes to an iPod.
If you have enabled Genius in iTunes, you can also use it on your iPod. Play a song on your iPod, then tap the album cover. Tap the "Genius" icon, which looks like an atomic symbol, to create a Genius playlist. You must have connected the iPod to iTunes while Genius was enabled in iTunes before this feature will work.