"I know we live in a kind of Open Source e-Hippie era where everything should be free and that making money is somehow a bad thing, but wake up people, money is what really drives innovation.
Paypal and eBay are both excellent services, and you've got a choice of paying very reasonable fees, or using one of the many free competitors. Good luck with finding one."
I guess you never had a single economics course in your life, much less worked in the field.
First point is, economic theory has shown for three centuries that efficiency mandates marginal-cost pricing (if you don't understand, it's because you're ignorant, check wikipedia or other). That includes price of listing items on the net.
Second point is, auctions are the best example in the world of network effect (once again, ignorance can be solved: check economy+"network effect"). This means that's ebay is an obivous natural monopoly (for "natural" before "monopoly, you're starting to know how to get the solution to your problem), and that as a consequence, emergence of any kind of competitor is amost utopian as long as ebay listens to the market and doesn't push it too far. Then it's free to still pushes it much further than it could in a free-market economy that allows competition (to understand why in this case it doesn't.....).
In the end, it's obviously not making money that is a Bad Thing but making money out of a natural monopoly abusing its dominant position.
Bonus for you cos' I don't expect you'll solve your ignorance problem by yourself:
Assume a second that we authoritarily put all of the items for sale and all of the buyer/seller accounts on myAuctionIsaCompetitorToEbay.com with a rather crappy service and the new ebay fees (while ebay would retain the former, cheaper ones).
What do you think would happen? Would people flock to eBay, an empty site where you can find no buyer for your goods and no sellers if you want to buy something?
People would stick to that other site, not because it's better, not even because it's remotely good, but because the OTHER people are there, and the most precious ressource for an auction site is the people, not the site.
Hence, it proves that quality and innovation has nothing to do with eBay's current success. Any other site that would have the market share would just kill ebay like ebay kills everything else because it has the market share.
It just had the critical mass to become a de facto monopoly, and you don't have a choice to go to a competitor because you'd be almost alone there.
That's a classic "winner takes it all, and then can suck big time afterwards without losing anything"