Screen Shot 2011 09 15 at 03.58.45 520x377 Battle of the cloud music players: Rdio goes free AND ad free. But how?Not to be outdone by MOG’s announcement today, rival Rdio has just announced via email that it will be revealing an free version of their service without advertising.

How does that work? Well according to an interview with the SF Gate COO Carter Adamson says that new users will get a free trial and how long that trial lasts depends on how much you use the product. Yeah, we’re not quite sure how that works from a user experience or business model point of view either.

What is clear is the music-in-the-cloud space, primarily dominated by Spotify, Rdio and Mog, has turned the competitive notch up to eleven, so much so that a company is willing to offer its product completely for free with no alternative source of revenue.

Speaking to All Things D, RDIO CEO Drew Larner says:

“We know free is powerful, it’s a great way to increase your funnel…but it’s about not creating a tier for an alternative or replacement for what would be a paying subscriber.”

Earlier today MOG announced it would open up its 11 million songs to users in the US at no cost but it would be ad-supported. Rdio’s email announcement appears to be in direct response to that.

The next big music announcement we expect to see will be on September 22nd, when Facebook is believed to be revealing its new music service in partnership with one or potentially ALL of these companies.

Rdio was founded by Janus Friis, one of the founders of Skype and is funded by Atomico, Mangrove Capital Partners, and Skype.