It's been less than a month since Radiohead turned the music labels on their head by releasing their album for free on the internet (they weren't the first, but they were the biggest band to-date to do so). At the time, Nine Inch Nails got released from their contract with EMI and Trent Reznor was promising some changes to their distribution model and many suspected he would do something similar to Radiohead. It didn't come as a surprise considering how much he had publicly bashed music labels in the past.

Fast forward about 3 and a half weeks. Trent produced a hip-hop album for Saul Williams called "The Inevitable Rise and Liberation of NiggyTardust!" and unsurprisngly many are saying it sounds like hip-hop with a NIN twist to it. The album is now being distributed (as expected) online. One complaint some had with Radiohead's distribution was that the quality of the MP3s was only 128Kbps, which isn't that great. For this album, you can get the entire album in 192Kbps for free. Or, you can cough up $5 to get 192Kbps MP3s, 320Kbps MP3s, or FLAC lossless files.
I haven't gotten a chance to check it out yet, but I am loving this new model. I can easily get the album for free and give it a listen. If I find I really like it, I can directly support the artist by going back and purchasing the album for $5, which is more than they would ever get from a CD sold by a label. If I decide I don't like it, I'm not out any cash for giving it a listen.

As has been mentioned before, it's easier for those that are already popular to start distributing in this way, but it seems like a viable (and likely more profitable) business model which benefits both the artists and the fans by cutting out the middlemen.