Sun is going to make almost all it's software freely available.  The idea being, it eases adoption (it's free afterall) and builds developer mindshare.  Business-wise, the idea is revenue is generated through fees for support and services.

At the same time PC makers are traveling a similar path.  PC prices are tumbling, while at the same time warranties are getting shorter and tech support fees are rising.  PC makers re coup their costs through services revenues.  With $300 PCs ($400 laptops), will we see the hardware become free?  Some analysts feel Apple is feeling the pressure to lower it's entry-level prices and the switch to Intel will help that.

The model is not foreign to many consumers already.  Look at your mobile phone.  How much did you pay for it?  Probably nothing (or close to it).  But, how much is your monthly service bill?  How much do you spend annually on mobile service?