How Come It's Free?

This morning I excitedly told my mother that I would soon be getting Live TV that's interactive on my computer. I said, "It's free." She asked, "how come it's free?" (Before I get to the questions consider taking a look at LiveStation for yourself. If you sign up for Beta mention my name.)

Questions for Discussion:
1. What's the business plan of companies like Live Station? (Would anybody pay for these services if they charged?
2. Can advertising alone make enough profit for Live Station? (Can advertising alone make enough profit for companies like Flickr?) What's the difference between advertising on LiveStation and advertising on Flickr?
3. What will people pay for in the future? What will be free in the future?