Where's The Profit?
A business has to make money somehow—so how does a business make money if all their products are free? Well, a number of ways:
Some open source businesses make their money from training people to use their programs, such as the employees of other companies. Others get their money through providing paid technical support for their products, such as Canonical Ltd. with Ubuntu.
Still others offer some free products alongside other products that are available for purchase, such as Sun Microsystems offering OpenOffice for free while offering the paid-for StarOffice right besides it. Other open source businesses, especially lone individual developers, will make a large portion of their revenue through donations of people who want them to keep at what they're doing.
Sometimes, one company will make an agreement with another company to include some sort of advertisement for the product within itself, such as Mozilla's partnership with Google for the inclusion of their search engine within Firefox. Others still put advertising, such as Google AdPages, on their download and support pages, depending on that for their revenue.
Most commonly of all is some combination of the above techniques. All in all, there are plenty of ways for the open source model to be viable.
This doesn't entirely satisfy some businesses, however, which turn to “hybrid" licensing models, taking something of the best of both worlds, open source licensing and traditional licensing.