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Briefly, they sell success, defined however their playerbase defines it. The heart of the model is making a game that would normally be considered too difficult, then putting the shortcuts up for a price. The advertising challenge is making it look like you can succeed without paying money, without providing that opportunity for less than a Herculean effort.
Let's say getting a skill to its highest level would normally take 40 hours of monotonous work. If someone offered you the opportunity to skip it for $2, you have 3 options:
1) Pay $2.
2) Grind for 40 hours.
3) Don't play.
Option #2 is a terrible option-- almost anyone's time is worth far more than that. You've thusly created a de facto pay-to-play system with a front-end illusion of free-ness. Once you get people invested in playing, you can gradually reduce the impact of $2 until you find a saddle point where (participation * dollars/participant) maxes out. Each sale bootstraps the next-- it's harder to walk away from a character when you've already spent $50 or $500 on it.
This model isn't just applicable to game mechanics, of course. You can sell political power in a pure roleplaying game (hold an auction where the winner gets first pick of the "parts"), sell access to locations in an exploration-themed game, etc.
The trick is offering just enough to take Option #3 off the table for some of your players.
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