I don't know about you, but sometimes it seems like all of best domain names have already been taken. On more than one occasion, I've come up with a great domain name for a site, only to find that someone else had already purchased it. I can live with that, but sometimes I've found that it has been purchased by some scum domain scavenger, and that's really annoying.
A domain scavenger is someone who purchases a whole bunch of domain names under theory that people will want to purchase some of them during year or two that they own them. These people are bottom feeders, as they hold many useful domains, demand huge prices, and do not provide any real value. It's not uncommon to find that a domain name is not available, to check WHOIS information and find it is owned by "this domain is for sale". In fact, some of these scum have been known to purchase thousands of domain names made of up first and last names from a phone book, in hopes that at least some of people will want their names as a dot com.
Anyway, domains are only purchased for a specific time period, and they do come up for renewal regularly. Quite often they are not renewed, and at that time domain names may be purchased by others. Even so-called "good names" are occasionally not renewed.
Sometimes domain names do not get renewed because business that owned them is no longer operational. Sometimes business still exists but has found it no longer wants or needs a domain name. Quite often bottom feeders will allow their unpurchased domain names to expire because they don't have funds to purchase them again or they feel domains are no longer marketable or profitable.
Occasionally, domain name holder has died or lost interest in their business or internet. Once in a while a domain is allowed to expire because it has attracted some maliciousness and it cannot be maintained, and most often of all, domain name holder simply does not realize that it needs to be renewed. In this last instance, domain name is unintentionally expired and someone can purchase it before owner realizes it.
In any event, regardless of why a domain name expires, you can often find yourself in a position to purchase one that has been previously owned. Note that in addition to expired domains, you can also purchase domain names on after-market (by making bids) or from domain name resellers (the bottom feeders mentioned above).
Some Advantages Of Using Pre-Owned Names
The name was part of a link exchange - Webmasters work hard to get their sites involved in link exchanges. This means domain names are listed on other sites, and this is useful for getting traffic. If you take over a domain name, you can inherit these incoming links and resulting traffic.
It was listed in Yaho, DMOZ and/or Looksmart - A small industry has sprung up recently, which consists simply of selling tools and reports to allow people to quickly find domain names which are listed in Yahoo, DMOZ, Looksmart or other directories yet have expired. By expiring, these domain names are up for grabs, and all of resulting benefits for original site transfer to new site. For a well placed entries, this can literally mean hundreds of thousands of hits per month.
There are hundreds of thousands of sites listed in Yahoo and millions in DMOZ. Anywhere from a few dozen to a few hundred expire each month. Eventually expiration would be discovered and entry removed. However, if someone purchases domain name quickly enough, entry will remain and you will gain that traffic.