What revenue models exist for online games?
- Subscription. The easiest model, where you simply require a sum of money from your players each month. Monthly payments are most common, but variants exist. Most famous example - WoW.
- Freemium subscription. Essentially the same as subscription, but players CAN play for free with some limitations. For example, non-paying players can't visit all locations, or reach maximum level, or somesuch. Dungeon runners used this model, and Dofus IIRC.
- Box sales. You simply sell boxed version of your game for some fixed amount, and let players who bought it play forever after. Guild Wars does it; also this model is common among team shooters like TF2 and COD:MW2.
- In-game advertising. Show some ads to players and hope they bring enough money. I'm not aware of games that use advertising as a single, or biggest, source of income.
- Microtransactions. You sell some virtual items to your players for trivial (or sometimes not) amounts of cash. Some games only sell "cosmetic" items that do not affect gameplay; some sell "helpers" that make the game a little easier; still others sell all kind of game-breaking uber-weapons and such. Almost all Asian games use this model extensively.
- Virtual currency. A very special case of microtransactions, this is where in-game virtual currency has a fixed rate of exchange with real-world currency, and can be exchanged both ways. The only game that does it, as far as I know, is Entropia Universe.
- Server leasing. You sell virtual space in your game, allowing players to have their own place in the game. Second Life uses this model.
- Merchandise. The game itself is free, and you make money by selling game-related merchandise like posters and t-shirts and the like. Kingdom of Loathing is a game that uses this model.
- Offer walls. A kind of microtransactions, but instead of selling items for cash, you show your players a "wall" of offers from your partners. Something like "Participate in this online survey, and receive some in-game currency". D&D Online had it at one time, and a lot of social games use this model in addition to simple microtransactions.
- Offer flash games for free to other portal sites. A very very BIG component for a lot of sites. Used to drive traffic to their main sits. It's essentially exchanging content for a link back to your site. (Added by eLouai)
That's all I can think of at the moment, but I'm sure I missed several more.
Freemium - Make the bulk of your game available for free, but provide paid premium content (e.g. Fantastic Contraption and Quake Live). There's obviously a bit of a balancing act with choosing how much to give away for free: you have to make sure you give enough so that they can enjoy the game, but not enough to satiate their appetite.
Adware - Make your game completely free, but with adverts. Ads could be in-game, around the game canvas (for browser games), or could be shown intermittently throughout the game (like television ads). Note that the viability of this is debatable (Quake Live was originally ad-based, but turned to freemium when they realised that they weren't making enough money to cover running costs).
Subscription based - Players pay a regular subscription fee to play (e.g. most MMORPGs). This could also be complemented with an initial free period (e.g. first month free).
Sponsorship and licensing. Example: Flash Game License.
"Developers can showcase their games and even get valuable feedback about them, while sponsors can browse an extensive game library, choosing exactly the games that fit their needs."
donations ala the humble indie bundle
Micropayments - allow users to buy in-game items & perks for tiny sums of money.