Branding. Market domination. They're the 10th most visited site on the Internet (according to Alexa).
They place ads on your blog (read the TOS) Read this months INC theres an article about the founder of wordpress.com.
Market penetration. More people using it and don't want to leave for other software. More people using it means more plugins. More plugins, means greater monopoly. I'm sure $$ profit is in there somewhere. lol
It's simple to use and it's free. You are still able to be in control of it as well. Unlike blogspot.