How is that different from buying software for a computer? I can install a linux distribution or buy windows. It's the same hardware, different "feature flag". Somehow that's not crazy.

This is more like your computer coming with 2 hard drives.. One active with your OS, one empty. You can at any time pay $100 and start using the other drive. Otherwise it sits empty.

We are talking about giving people hardware for free, then paying money to turn it on or not.

I don't follow your analogy. I'm not sure this qualifies as a feature flag.

Since the time of IBM mainframes this business model had been known as the Golden Screwdriver.

Http://www.urbandictionary.com/define.php?term=Golden%20Screwdriver

You can buy a kindle with ads for $50 or a kindle without for $70. I don't like the way all this is progressing.