Copied from http://support.apple.com/kb/HT2978:
Sometimes if you sync a portion of your iTunes library to iPod or iPhone, you may be unable to create a Genius playlist with certain songs while using your device. You may see one of the following messages:
- "This song does not have enough related songs to create a Genius Playlist."
- "Genius is unavailable for the selected song."
If this happens, try making a Genius playlist with those songs on your computer. If you can make a Genius playlist in iTunes on your computer, then it is likely that there are not enough songs on your iPod or iPhone that go great with the desired songs. Try syncing more of your iTunes library with your device. If you are still unable to make Genius playlists from those songs, consider making Genius playlists in iTunes first, then syncing them to your iPod or iPhone.