Advertisements and Spamming people.
I know they make their money buy selling their customers e-mail addresses and selling ad space on all the hosted sites.
actually they dont make any profit
I used a free host a long time ago. I think that most of their money comes from advertising - most have a banner at the top of the page, or to the side. Some do pop ups.
free hosts can sell their ad slots on their free users sites. they can make alot of money off that. hence 200+ sites, with 1-2 banners on them, and a host can sell the slots for 5,10, even 30+ $$$ u can make alot of money off it.
I don't think anyone providing free hosting for 100% Free. There's always a catch, For an example, some of the Big hosts i knw provide free hosting for posting on their forums/blogs etc, or for placing a link back to their site, and some use it as a brand promotion strategy.
The hosting for posting model has really taken off in the last year. I think that it's a great idea personally--as long as they have some kind of focus and don't create some huge "general chat" forum that's littered with spam and nonsense.Free hosting is just waiting for some great idea that will make it profitable and still have some quality to their services.
A good while ago, they were mainly a "free host" deriving money from ads placed on the users' sites. These days, they're a budget host, and their free hosting is there more as a legacy than anything. A side effect of being one of the larger free hosting providers used to be a good search engine ranking for hosting related keyphases.
Some do by sticking huge banner advertisements left, right, center of their website or even popups. You'll find then they profit it by selling it off.