Proprietary freeware allows authors to contribute something for the benefit of the community, while at the same time allowing them to retain control of the source code and preserve its business potential.
It's illegal but most of the people willing to pay for it wouldn't know that and wouldn't know they can get it for free. I've also seen people say they're not paying for the software itself, they're paying for the service of burning it to a cd. I think it's crap but that's a loophole on sites like ebay.
what I find so funny is that people don't think about going to google type in what kind of software they and placing the word "free" next to it. You usually can find some decent software for free on the internet.