I started off back in 2001 by offering free hosting. I was opening a fair few accounts per day. For me the purpose was to get the message out about the hosting company I started. 6 months after opening I then had a whole new site design done and did away with the free plans. A few clients converted over from free to paid, but I was seeing a fair bit of traffic as all the free clients were using theirname.myhostname.com. Sign ups did great to the paid plans.

Back then I offered something like 10Meg of space with no control panel, no email and maybe 100 meg of transfer. A couple of abuse cases happened but I quickly shut those down.

I am not in the hosting buisness any more as I came out a few months ago to try other things. The business still does well and is still running today. I do not know if I would go that route again if I were to start hosting again.