This has been the topic of many conversations lately and much of what has been said here has been really interesting to me in my own reflection. I have been formulating a broader thesis, in some ways, as how paradigms of artistic expression are paralleled in evolutionary development in many illuminating ways. I feel that in most cases, artists and creative expression tends towards an equilibrium of certain niches and when such a thing happens, people feel saturated in a number of artists that sound rather similar.
It's a matter of being conservative, to my mind, in that it makes sense to not be too extreme or innovative because it's a potentially dangerous thing to deliberately isolate one's self. There won't be any other artists that sound similar and may lead fans of that music to your music, there might not be an appealing or clever reference made by a music critic, and last.fm or the music genome project may rarely put you in under some 'similar artists' field. However, there's a lot of empty space, infinite empty space in the world of sound and it's always possible to 'innovate'. Though, I'm with Taylor in really feeling like there's nothing 'new' to be found or created (if I am interpreting him correctly), but I don't find that defeating because I think what really happens is the re-combining of influences and experiences.
It helps, then, to have as broad of a range of influence as possible because that may often appear as something 'new' to music critics and listeners (but I am quick to remark that they just haven't heard what influenced the artist). New niches appear when a novel and functional recombination appears, and it has the potential to attract a broad audience because of that. There would be many different reasons to like the music, but it wouldn't be unfamiliar. In fact, it would be better served to contain a striking but undefinable familiarity - it would be really functional music, to put it boringly.
I have personally felt like a sponge throughout much of my life and I really saturate myself in things that I love - obsess over them, study them, experience them in as many ways and contexts as possible and absorb it in that way. When I create, then, these things have a really profound influence on me and I can really reflect on it later and hear certain influences (usually a combination of musical but much more often sensual and philosophical) and I really love that aspect of creating. I am usually just after creating what I want to hear, which is often similar to other artists, but I always seem to find many spontaneous processes, and greater, more refined philosophical justification to tuck in there.
In the end, I feel like conservative tendencies are pretty natural, but mostly a product of a lack of effort. While biological processes are severely limited in their ability to innovate, we have much less restriction. The passive efforts and niche-dwelling artists seem, to me, just laziness (and I'm not trying to be harsh, I love a lot of the music that is representative of this or that I find conservative). But, mostly time spent on music, experimenting, or listening and exploring other music or influences. It's rather simple to 'jam' pretty sounds and layer them for a few hours - and many times that can create something listenable, beautiful, magical or whatever else. Very few artists are committing weeks and months of effort to creating a single work, or having the patience to develop new processes, or having the energy to experiment without feeling like time has been wasted because a new track isn't sitting there at the end. I think it's clear when an artist does, though, and really has some excellent commitment to creating.
That's my long-winded yet severely abridged thought on this topic at the moment though I'm working on a larger bit of writing and hoping to interview several artists and engage a lot of other people in its formulation. It's nice to see this thread and read other people's comments, many things I hadn't thought about. Hmmmm..... So it goes....