Pyramid Scheme and Chain Letters
Here's how it works. You receive the Chain Letter normally with very convincing copywriting that tell you clearly that you too can benefit from this once in a lifetime Business Opportunity. With very minimal investment on your part (normally between $1 to $5) it tells you here is your best chance to become rich. The most common form of Chain Letter involve a list of 6 persons.
You are supposed to send your investment to the first name on the list and remove it from the list. Move the other 5 names up one spot and insert you name in the sixth or final spot. In the traditional way you need to send the money to the physical address attached with the names.
Now, online payment method is the preferred way of receiving money via Chain Letters Pyramid Scheme. Major payment system providers such as Paypal as well as many other smaller payment systems are being used openly to make payments. Paypal for example try to control these unhealthy transaction from its system, but as usual, these kind of people are Masters at what they do.
In the offline world one need to mail as many Chain Letter as possible or place the copy at several strategic places so that more people are exposed to the Letter and hopefully increase the chances of naive people sending in the money. Online, the free methods such as email spamming and message boards spamming are the favorite methods of ads exposure.
Normally, there are no products involved in Chain Letters Pyramid Scheme. But people are getting better at creatively varying the system so as to legalized their version of Pyramid Scheme. Many now include "products" with the system. So when you send your money, you will receive the "products" whether via physical mail or email. The products more often than not are the recycled information of how to advertise the ads and increase the exposure to your ads.
Some online scammers are also using the the pyramid system to market their "products". This certainly added to the bad reputations Online MLM system already known for.