Simple, really. You come up with an idea that you know people will want to link to; an example would be the Burger King's subservient chicken (http://www.subservientchicken.com/) or KiddofSpeed's motorbike ride around the Chernobyl area. Then you drop a few links here and there or make a press release, and wait. Suddenly the idea gets picked up and there are lots of links from zillions of sites, people email each other about it, and everyone wants to see what's going on and what's behind the idea. Whoever set it in motion gets all the publicity and a natural boost in traffic. The idea quietly fades away but the site either gets left in place 'as is' to pick up the traffic or is expanded to make best use of the traffic. A link or two to another site owned by the author will also benefit that site with traffic and very strong inbound links. Viola! Viral marketing. A current example of viral marketing is the highly successful Million Dollar Homepage, which has been picked up by the main news media (as was the subservient chicken) and has earned it's author around $150,000 (and counting) in the space of about a month.
Awesome information mcfox - the milliondollarhomepage is a great example too - I actually thought about buying up ten pixels or so only because it's become such a buzz. Actually, I'm just jealous I didn't think of it! People fail to realize the power of press releases too - anohter great tidbit. It needn't cost hundreds of dollars to get written or publicized either. Additionally, it's not even so much that they get picked up by different news agencies online and otherwise, but the authoritative backlinks certainly don't hurt from Google News and others ....
Great post, mcfox! I was blogging about Viral Marketing just the other day - mainly in regards to informational products & "Internet Marketing": http://clicknewz.blogspot.com/2005/10/viral-marketing-made-easy.html . Harvey Segal (author of the Supertip series) is probably one of the best examples I can name off the top of my head. He has been publishing "free ebooks" for several years now... and I have no doubt making oodles of money at it. Some people dont realize the power of FREE.