Ad supported usually equals free these days.
> Amazon says it will be pushing “special offers directly on your Kindle”, including things like $10 for a $20 Amazon gift card, and $6 for 6 Audible books.
http://techcrunch.com/2011/04/11/amazon-announces-ad-support...
EDIT: ah, it was at the end of the amazon page actually :)
http://www.kk.org/thetechnium/archives/2011/02/free_kindle_t...
My suspicion is that this is an incremental development which will serve as a transition to a new pricing structure. As hardware costs decline, one of the largest variables in the pricing structure for these devices will come to be estimations of customers' future spends in the store.
Any model that guarantees a spend is likely to find traction, and I expect to see multiple subsidy models emerging.