You can find a lot of free stories on the 'net, of varying quality.
Posting free stories online is an easy way for new authors to promote their work. The idea is that
a) people who like the stories will help promote them through word of mouth ("virally", as the cool kids say)
b) people who like the stories will be willing to pay, to read more stories by the same author
I've read a lot online - in fact, that's the main reason I bought an e-reader. Otherwise I'd have very little to read on it, because I'm not willing to buy DRM'd ebooks. I'm very thankful for Baen's DRM-free "Webscriptions", but I'm only really interested in a couple of their authors.
I recently read
Fine Structure by Sam Hughes, which I found via the
Web Original recommendations on TvTropes. (It's "hard" science fiction) In this case there's no "donate" button, and no commercial books or merchandise; it looks like the only contribution I can make is to spread the word.
It made me think about joining Delicious again - and "voting" for the book, by entering the website as one of my bookmarks. But I wonder what other options people use...