To me, peer investing (loaning money to someone else via a peer lending website) is much more riskier than penny stocks. However, as with Prosper, there is a $25 minimum so you can keep that risk of losing a lot money very low.
I won't go into the details about Prospers business model, but I will say that they have fairly high standards with regard to who they (we) lend money. That said, some research will reveal opinions from "lenders" that are extremely contradictory. Some love it and made a killing, others hate it and have lost their shirts, and some don't understand the business model. Regardless, most of the reviews are full of adjectives and colorful words describing their experience, so filtering out the non-sense can be daunting.
One of the important facts left after my intense filtering is that well over 90% of the borrowers that have had default/delinquencies in the past WILL default and/or be delinquent. For me, that statistic is 100%. One borrower has been one week late for every payment since the first one. I guess this is the reason why the interest rates are so high. I do have other borrowers that have paid on time and my return has been well above 10%. So, as in stocks, diversity (multiple borrowers) is key to high returns.
If you have some money that is burning a hole in your pocket, don't waste it, loan it... It could turn into a really good monthly revenue generator.