In Wired 16.03, Chris Anderson penned an insightful article entitled "Free! Why $0.00 is the Future of Business." In it, Anderson outlined six different ways that things can be "free" yet still create a viable business model.
These six kinds of free are:
Freemium – Offer a limited-functionality free version of a product to encourage trial, and have a purchasable premium version available for power users, a term coined by Fred Wilson
Advertising – Offer a free service to end users, and sell advertising to advertisers
Cross subsidies – Give the razor away free, and charge for the razor blades
Zero marginal cost – Products such as podcasts and digital music effectively incur a zero marginal cost to "ship" each unit
Gift economy – Items are given away at zero cost, Freecycle is a good example