What is revenue stream of free mobile application of games?

There are so many mobile applications or games available in mobile app stores today which they distribute for free to users. They don't even show ads in their apps. Even, some of these apps are very nice and we can see a lot of efforts put to develop it. I am just wondering what can be the revenue stream for this kind of application?

Does anybody have any idea about, from where they generate revenue or otherwise what encourages them to put this much efforts for free?

In app purchases is one way free games(and non-free games) can make money. Can be anything from a cosmetic fix - new outfit, sunglasses..., to things that influence game play - special weapon, spells, skills and the likes. I don't play any mobile games, but one desktop game that has a similar revenue model is Eternal Lands, a MMORPG that makes money by selling items, private maps, and bots to players.

Another way would be to have free and paid modes - with the game free to play, but having certain areas, skills, levels, items and quests available only to paying players. The MMO Runescape follows this model.

One of the biggest concepts as said above is Freemium. Basically the access is free but you pay for upgrades, like better weapons, faster building time, etc. This seems to be the end all for most games nowdays, in my opinion though, it's getting overplayed as has happened with the free ad supported websites when they started. To the point where some sites nowadays are so littered with ads for useless junk, they are barely useable.

There are of course other ways to get revenue like sponsorships, product placement, data, etc... Really depends mainly on how inventive you are, and who your customer base is. A free app, isn't as much of a product as it is a tool. First and foremost, figure out how to make money and then decide on the tools to bring the money in