In Forbes magazine, sci-fi author Cory Doctorow writes:
"There's no empirical way to prove that giving away books sells more books--but I've done this with three novels and a short story collection (and I'll be doing it with two more novels and another collection in the next year), and my books have consistently outperformed my publisher's expectations. Comparing their sales to the numbers provided by colleagues suggests that they perform somewhat better than other books from similar writers at similar stages in their careers. But short of going back in time and re-releasing the same books under the same circumstances without the free e-book program, there's no way to be sure.
What is certain is that every writer who's tried giving away e-books to sell books has come away satisfied and ready to do it some more."
Seth Godin has done the same thing with some of his marketing books, to good effect. So does it make sense to put your books out there for free? The answer may be in a comment quoted by Doctorow: "as publisher Tim O'Reilly wrote in his seminal essay, Piracy is ProgressiveTaxation, 'being well-enough known to be pirated [is] a crowning achievement.'"
If you're unknown and put your stuff up for free, the perception may be that it's not worth anything. If you are somewhat known, doing the same thing may get you more talked about and help the sales of the hard copies of your work. At that point, other benefits may kick in, as they have for Doctorow: "What's more, having my books more widely read opens many other opportunities for me to earn a living from activities around my writing, such as the Fulbright Chair I got at USC this year, this high-paying article in Forbes, speaking engagements and other opportunities to teach, write and license my work for translation and adaptation. My fans' tireless evangelism for my work doesn't just sell books--it sells me."