This has been discussed a lot in the past.
At 1and1.com you are not paying for the domain name per se, which they say is included free in your "package." Since the name is free they say you still need to pay the yearly fee unless you cancel the package too (but the package is tricky to cancel I have found out).
You pay for a 'package' per year regardless of there being a domain there or no domain. They still charge the yearly fee. I believe Yahoo has also adopted a similar business model which includes an optional domain reg and you are charged regardess of the name being in or not in the package.