Did you know there was a grace period for sampling domain names before you buy? I didn’t until I read this article by Anick Jesdanun on Entrepreneurs Profiting from Free Domains.

I’m a bit of a domain junkie, in that I’ve purchased somewhere around 90 domain names, though I haven’t gotten into the domain resellers business yet. Admittedly, I have grand plans for all of them - if I ever get around to building the sites and writing the content.

I consider myself pretty good at the trial and error process of finding a good, keyword rich .com or .net domain for under $7 (I use GoDaddy.com for domain registration + search the web for a coupon to use to get domains for $6.95.)

That said, I didn’t realize how “entrepreneurs” were profiting from domain name trial periods. Apparently, there’s a five day grace period that was originally designed to correct mistakes like registrants mistyping the domain name they’re trying to buy.

Entrepreneurs, spammers, and scam artists are taking advantage of this grace period to buy domains during this period and test them out to see which ones generate the most paid search traffic. They keep those that make more than their $6-7 annual fee and give the non-profitable domains back on day four.

Speculators write software to automatically register hundreds or thousands of names. Some are variants of trademarks or generic keywords that Internet users are likely to type — or mistype. Others are names grabbed after their original owners fail to renew.

During the grace period, the entrepreneur puts up a Web page featuring keyword search ads and receives a commission on each ad clicked. Services like Google Inc.’s AdSense for Domains and Yahoo Inc.’s Domain Match help large domain name owners set them up, even as the search companies officially oppose abuses in tasting.

Addresses likely to generate more than the $6 annual cost of domain name are kept — not a high threshold given how lucrative search advertising is these days.

The rest are thrown back into the pool on the fourth or fifth day, only to be grabbed by another group of domain name tasters.

What’s crazy is that there are up to 6 million domain names tied up in this process at any give time! When one person gives back their domain, another snaps it up before it can go back on the market to the public.

The practice has spiked, with an average tasting of 1.2 million names each day in December, compared with 7,200 two years earlier, according to data from Name Intelligence Inc., which analyzes domain name patterns. Legitimate registrations made up 2 percent of the registrations at the end of 2006, down from about half in 2004.

Only 2%!