By that I mean the price you pay for a newspaper has nothing to do with the cost of prodution, including its editorial costs.
What you're paying are delivery costs, the money needed to get that paper from the plant to your door or your vendor's stand.
By selling disks of its free software for $19.99, Ubuntu is doing the same thing. The money pays for BestBuy to deliver it to stores, for shelf space, and for tracking sales.
We have, in fact, been here before.
Back in the late 20th century, floppies with shareware were sold in stores and at trade shows for $5-10 each. Again, the money went to distribution.
The software would then try to tease more money out with ads, nagging, or by turning itself off after a few uses. (Ask your dad about that.)
Ubuntu does not have to do any of this, although contributions of time, code and money are always appreciated. What it's trying to do is find an audience which has hardware but lacks regular Internet access or knowledge.
Believe it or not, there are such people.
Big Money Matt suggests, quite rightly, that the key here will be whether Ubuntu stays with the program, noting Red Hat didn't. But Red Hat was never really a consumer product. Ubuntu is.