Hadn't come across this, so I did a bit of reading on their site - primarily to see how they do the images at no charge.

They're a venture of Corbis, the same folks who brought you SnapVillage, and there's an interesting Reuters video online that explains a bit (an interview from November with the Corbis CEO).

The idea is that they offer the images for free but you get an ad with it. Given that, I suppose it leaves an opportunity for micro sites to continue to sell to bloggers who don't want ads. It'd be nice if the micros had some sort of easy interface for bloggers to get images into their blogs (and pay for them, of course), but perhaps that market isn't lucrative enough to justify the engineering work.