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The answer is ads. These gaming sites earn through the ads. They get people onto the site, with the hope of some people clicking on the ads and buying from them. That could be a great strategy, especially for contextual ads. For example, when you have sports online games, you can also display sports ads on the site. Chances are people playing the game are also sports fans or sports-minded people, so it would be a great venue to sell sports goods. And that's not just true for sport free online games, the same principle can work with action arcade games and free adventure games.

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There are other means to earn, such as offering a game as free for the first version, then having the later versions as paid games. Other schemes include purchasing membership, or game credits. But for purely free sites, ads and marketing are their bloodline.
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