(1) subscriber acquisition and (2) neutralising the competition.
AOL for example printed and gave away for free, millions of CDs with free dialup access, spending as much as $35 on SAC (Subscriber Acquisition Cost) [1]:
> How much did it cost AOL to distribute all those CDs back in the 1990s?
>
> Steve Case, co-founder and former chief executive officer and chairman of America Online:
>
> At that time I believe the average subscriber life was about 25 months and revenue was about $350 so we spent about $35 to acquire subscribers. As we were able to lower the cost of disks/trial/etc we were able to ramp up marketing. (Plus, we knew Microsoft was coming and it was never going to be easier or cheaper to get market share.) When we went public in 1992 we had less than 200,000 subscribers; a decade later the number was in the 25 million range. That helped drive our market capitalization up from $70 million at the time of the IPO to $150 billion when we decided to combine with Time Warner to accelerate our transition to broadband and diversify our revenue mix.
[1]: http://www.quora.com/How-much-did-it-cost-AOL-to-distribute-all-those-CDs-back-in-the-1990s
How are they making money on the free trial, during the trial?