For the community it's a game (with either real or fake money), but the predictions tend to be surprisingly accurate, given a few conditions are met.

It can also be used by large organisations in the decision making process (which is how I presume this could be funded), but I haven't heard of this actually happening in the wild.

More info: http://en.wikipedia.org/wiki/The_Wisdom_of_Crowds

edit, better link: http://en.wikipedia.org/wiki/Prediction_market