At the Innovation Lab meeting at MIT this weekend, the founders of Threadless gave a cool talk about how their site works. Go check it out. They were mentioned today on Ctrl+Alt+Del - Tragically l337 too. Amazing site, great shirts. Except Flowers in the Attic which is just sad :-(, powerful, but sad.
The way Threadless works is that two or three designs each week are chosen from a zillion submissions by the threadless community and the designer is given I think $1000 dollars. Then they print the shirt and sell it to the same community. Simple? Sure, I guess, but they do it so well. Some great shirts!