Rough Type has a good writeup about the value of non-paying customers. The conclusion is that non-paying customers may indirectly contribute more to your bottom line than paying customers directly do. I think this is something that’s been strongly understood, even if it hasn’t formerly been quantified, and is evident in terms like “community” and “critical mass”.
If true, it makes you wonder about things like software piracy, ripping music and movies, and the like. The industry seems to be shifting away from DRM, and BillG even acknowledged that there’s an upside to piracy of Windows.
It seems the key is striking a balance where you get something useful for free, but you see real value in spending money to get even more. With open-source software, the upsell is often support. Microsoft seems to be testing the waters with $3 software, assuming that most people would prefer to be legit if the barrier is low enough.