Do websites make money from having users use it, or is most of the money made from advertising on the site? Care to explain?

If you host pay-per-click advertising you get paid by how often those ads get clicked. More visitors, more clicks, more money. Other advertising models attempt to track the number of visitors to your site. The more eyeballs, the more money. Of course, one of the most direct way to monetize a site is to sell goods or services on it. The more visitors, the more chances for sales. All these cases share one thing in common. More visitors equals more money. More traffic is good. You hope you get so much it crashes your server, because then you will have the cash to upgrade that poor old flea-bitten box.