If you are new to SHOUTcast then this is probably something you may have already asked or you are trying to find out.
At its most basic, the SHOUTcast system is based around a 'client + server' configuration which allows you to run a server (either directly or via a hosted service) which can then provide a stream or streams of the 'source' connected to the server to any clients which are connected to the server.
The clients connect via a direct connection i.e. server <->> client where the main flow of data (the stream data) will go from the server to the client.
So a simple SHOUTcast setup would consist of the following:
Winamp + DSP ? DNAS [sc_serv] ? Winamp (Source) (Server) (Client)
This is not the only way to setup a SHOUTcast system and more examples can be seen in the shoutcast_system_overview which goes into more detail about the way SHOUTcast works as well as other ways of setting up a SHOUTcast system (see Wiki section 2.0).