we (The Iron Triangle) are doing a similar thing with giving away snippet CD's. For us, since we are trying to get established there is no better way to start creating a buzz. We give these away at shows and we never have enough. This makes the stuff kinda exclusive in a way because we can only give out so many per show. Additionally, I think it has brought more traffic to our website and at the very least it's the beginning of developing our fanbase.
Little Brother gave away at least 6 free songs on the Internet, if not more. I think that it's utimately successful because people are getting a taste of what they are buying. But it's important to communicate to your fans on the 'ethics' of buying music from indy artist. I think that ultimately that you will reap the benefits of having hardcore fans that will buy your music.
------------------------------------------------------------ subhaanakallahumma (Glory be to you, Oh Allah), wabihamdika (and I praise You). Ashhadu anla ilaha illa anta (I bear witness that none has the right to be worshipped except You). Astaghfiruka