I know that I used to make that free domain offer. Domains were cheap advertising imho, compared to say paying for a expensive banner campaign, just offering a free domain brought in a lot of customers.

These days I see a lot of offers for free domains when you pay for multiple years. Like "Free domain with purchase of 2 year hosting" etc. A lot of the bigger names do offer free domains too with their standard packages and GoDaddy always has some strange $1.99 or weird sale for their domains when you buy another service from them.