The two explanations (low price point, new distribution model) are not mutually exclusive. Baen Books, for example, has offered free sample books for a dozen years now, with good results for some authors. But there's obviously a difference in promotion on the Internet at large and a more targeted conduit like Kindle -- I don't think the Baen Free Library has been responsible for an author appearing on the NY Times bestseller list. And I'm pretty sure the rapid success of people like Amanda Hocking and John Locke is unprecedented.

edit: typo