I guess I should chime in - I've had a Prosper account since March 2010. I invested approximately $1500 from March 2010 to December 2010. At that point, they modified the bidding system for notes, and I decided not to contribute further.
I placed bids on high interest loans (rated D to HR). I specifically looked for borrowers that had already taken out loans through Prosper, and had successfully been making payments. Originally, there was a competitive bidding system, and interest rates would be driven down as more people put in bids towards a specific loan. In December 2010, they changed this system: interest rates could no longer be competitively bid down, and the auctions would close as soon as a loan had full funding. I did not like this change, so I halted further contributions to Prosper.
It's now about 2 years later, and the notes (3-year notes) are still collecting. I purchased 48 notes ranging from $25 to ~$60. 19 have been paid in full, 4 are in collections, and the rest are current. Prosper calculates my annualized rate of return to date as 20.13%. 20% is a great number, but that's only on about $1500 invested.
I think success with peer-to-peer lending takes too much time, since it requires researching through many listings to find the best notes. With the changes to the bidding system, it also put a time-constraint on finding the best notes before they were gone.
I am glad I tried it, but I can't say that I recommend Prosper.