The mechanism behind giving away the music is simple. Direct download from the band's website and/or other sites specifically designed to deliver high quality mp3 (or other audio formats).
I'm not talking about free samples to drive album sales. I'm talking free albums. We have to make the assumption that as music gets easier and easier to copy/trade/pirate, or whatever you want to call it, fans are going to pay less and less for music and the costs will only go up to cover the losses on the distribution and/or the cost of new technology to fight it. We also know that a sample, even a good one, does not always serve to convince someone become a fan. At least not a big enough fan to buy the full album.
Fans are created by giving an audience a comprehensive look at the artist in a certain light that makes them identify with the art is some way (superficial or otherwise). Indies don't have the ability to use MTV/crosspromotional tools/etc to hype smaller artists, and so without hearing the works in their entirety, potential fans do not have enough information to evaluate artists. This is especially true considering how the mindset of the young fan who has grown up with heavy media influence operates in choosing music. By giving the music away in an easy, no-hassle way, you allow the audience to make a more informed choice as to who they will be fans of. Bands will, of course, have to work harder at making better songs, because they will be evaluated on the art they create and not whether some distribution marketing company got it on the endcaps at best buy or whether some radio promoter got the right single to play 24 hours a day for weeks on end at the local clear channel radio station. Competition is good for experienced producers because they are the ones that know how to make a quality album. Demand for bands to create better music will drive them to people who are qualified.
Money can be made by artists in one of four areas: direct revenue from album sales, performance royalties, merch, and ticket sales. Giving away the music does not take anything away from performance royalties, because you can always retain that aspect of you copyright by prohibiting it from being used in commercial productions. Merch and ticket sales should increase because more people will know your music and want to come to your shows. We have complained for years that live music is in decline in many areas of the country. I contend that this could renew an interest in new upcoming live artists by getting their material out to a larger audience.
I am currently putting my money where my mouth is. In two months I will be launching a band via an indie label and the record will be available for free online and for $1 at shows. We have been spending over three months on production and I have paid an experienced co-producer a solid rate in an established studio. We will see if it pays off and I will keep everyone posted as promo materials are available and as soon as the album is available for download. The artist is a young indie punk band with some rough edges, but a good solid act and alot of drive. Their target audience is the highschool/college crowd which i think will prove to be a good real world test of this approach.