As a employer, what criteria do you use to determine if you will offer a paid internships vs unpaid?

The FLSA guidelines need to be followed, but the corporate decision has to do with the stage of the company. If you want to have more opportunity to be heard, the smaller the table, the easier it is to hear you. That means a start-up, where there will be no money to pay you, but the work will probably be more interesting. If you just want something for your resume, try for an internship in the biggest company you can get to take you, but don't expect to be more than a low-paid entry level employee, filing and going for coffee.

If a for-profit business is benefiting from someone's labor, that labor has to compensated a minimal amount, whether or not the business is showing a profit yet. And that minimum is currently a rather paltry $7.25/hr (higher in some jurisdictions) plus overtime. Among the most important "lessons" someone can learn from a job (if that's the excuse an employer is using for slighting their interns actual pay) is to value their labor and that of others (including those being displaced when unpaid "internships" are used to cut costs) and to adhere to the labor laws society has agreed upon. I am actually a named plaintiff in a class action lawsuit over this issue (Glatt v. Fox Searchlight Pictures) and invite anyone interested in learning more about the topic—or joining efforts to end this illegal, unethical and economically toxic practice—to check out the following sites: http://internlaborrights.com/ or http://facebook.com/interns.x.free.labor.