Massively Multiplayer Online (MMO) games are where everyone connects to a virtual world with their computers. They all play as characters in this virtual world and either fight each other or computer generated monsters.There are pay MMO's and free MMO's. The pay MMO's are usually setup on a monthly recurring basis, and the free MMO's make their money from allowing you to buy things inside the game. For instance the online flash game "Dino Run" http://www.pixeljam.com/dinorun/ is free to play, just go to the page, and click "Start Running" on the left, then use the left and right arrow keys to run to the right and try and outrun the meteors while collecting eggs on the ground, (press Up to Jump, and Spacebar to pause the game). It's free to play, but if you pay money, your dinosaur gets to wear a hat! I'm lead to believe there's some part of the game where you can socialize with other people and the dino's can walk around without having to worry about extinction.
These games are possible, even profitable, as long as the cost to operate them is minimal and just a few people donate. They still want players who don't pay because just them being there contributes to the richness and depth of the online world. You don't have to worry about losing to the pay customers since they only get a hat, and that's not going to let them run any faster or collect more eggs.
Now the next step up in this is a game I play for free "Ikariam". http://ikariam.org/ Everyone can play for free, and it's basically a game where you are the ruler of your city, and you decide how many citizens you will employ at the saw mill to gather building materials, how many citizens to go to work in the mines or the vineyards, how many soldiers to employ, how many ships, and how big the government buildings in the town are; any citizen that isn't working in the government is free to pursue his own interests, and pays taxes.It's great fun. It's also the definition of "open ended" since there are no scripted events, no monsters, no evil power out to destroy everyone, it's nothing but you and all the other "rulers" of their own towns. You are free to make new colonies, invade a neighbors town to take some of his stuff or gold, trade with your neighbors for goods you don't have, form alliances, or be a complete hermit with high walls and a huge defense and just do your own thing. You could even have no military and pay gold to another player to protect you; or play mind games with anyone that might attack you by sending them in-game email after they attack you offering to just give them resources if they will leave you alone, then pay another player to attack them while you build up an army, and then attack!
Half the fun of a game like Ikariam is the choices you make and what you want to get done, and how your neighbors, and everyone else in the world, reacts.If you devote 100% of your citizens to paying taxes, you are left to the will of the market prices for your building materials. And sometimes no one is selling, or the prices seem to high.Want to send everyone to work in the mines? Then no one pays taxes and you run out of money.Want to create a huge army? Their upkeep costs money, if you go bankrupt, they will start abandoning you.Want to attack your neighbor? He won't just sit there and take it, he'll fight back, and sometimes in ways you that don't make sense to you.Want to turn two of your enemies against each other? Assuming you can do it with only the in-game email (or maybe make some allies and setup scenarios to make them lash out). You can do most any political or diplomatic thing you can imagine.It's actually a great sociological experimental playground.
If you pay, as little as $1 a week, you can get 20% increased production. You can pay a few dollars and setup to allow you to convert some goods into another without having to deal with other people, or "the market".
So now your neighbor, can become more powerful than you, just by paying a little. You may have been in the game for months, slogging it out trying to get your resources up, and a brand new player can hop in, drop a few dollars, and get a big jump up.
The other end of this spectrum is Subscription games with no bonuses. And if anyone attempts to "beat the system" by spending money to buy a high level character, or buying in game gold, their will be punishments. The most popular MMO out there is "World of Warcraft" (WoW), and the company (Blizzard/Vivendi) has even sued other companies that create programs that can be used to put your character on "auto pilot" and farm gold for you while you aren't in front of your computer. WoW costs $15 a month to play.http://virtuallyblind.com/2008/09/29/mdy-blizzard-damages/
The thing I like about WoW is that I "know" that if I see a piece of gear on a character, they had to work for it. It is possible to give someone real money and have them give you gold inside of the game, and there have been problems with even the highest level players cheating in game, but attempts to "beat the system" are investigated and punished.
I had a friend tell me he played WoW on a "free server" meaning someone was able to run an illegal "pirated" version of the same game, but his virtual world was not tied into the virtual world I and all the other paying customers is on. I was intrigued and asked him if he could get things for free in the game, like free armor, or weapons, or break the rules in the game. He stated it was just like the original game, just free. I wondered why bother then? I'm sure whomever runs the server isn't playing by the rules, and probably none of his friends are, and if you ever happen to run into any of them in the game and want to fight them, they can just type /kill and defeat your character. If that's the case, why not play for $15 a month? Now you are in the exact same position, but no one running around with a /kill command on their hip.
To recap: When I play World of Warcraft, I know everyone is where they are because that's where they worked to be. When I play Ikariam, I know that the people I'm dealing with may be playing with loaded dice. When I play Dino Run, I think the people wearing hats are cool.
I should note that as of this writing (2008-10-05) any of these games could change over night since they are online. Thus they could change policies or prices.