Suppose you are searching or looking something in the internet or on google. You ended up at a free hosted site and tht site had real good content. But the site domain looked like (xxxx.xhosting.com) or (www.xhosting.com/xxxx). Will you leave the site instantly? or you rank that site as a good site? or you will again search for a (www.xxx.com) looking domain site?
Yes, naturally I'd look for information from a .com domain rather than a sub or free hosting domain... it's mainly on "reputation" (as the reputation of the free hosting domain's content is questioned.. it's general though).
Suprisingly, if I'm looking for decent content on a subject, I like looking at the ones made on a free hosting site, because they probably wont be writing for money because the ads arent theirs, but writing because they want to write. If I was going to part with my money on something, I don't think I'd even consider it if it was on a free domain. -Hecky.
Hosted domains make me think that the owner doesn't mind paying out a bit for the site and so cares more about it. Free domains make me think of a cheap owner. I'd rather visit payed hosted sites. Also payed hosting sites usually don't have as many advertisements, and I know where the advertisement money is going which is better if I know it's going to a good person rather than some company.
Personally, even if the content is good, id rather be visiting a paid domain and bookmark that compared to something like xoxo1234.whateverdomain.com