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I think the important part about any kind of giveaway is to make it part of a marketing plan. I know the words "marketing plan" are rife with tedium and the apprehension associated with the buzz word but that's just because marketing has become something done by people with no connection to the products they're trying to get people to buy.
For the artist or craftsman marketing is just the act of saying to people: "Hey, you know what, I have this stuff here you might like to buy." Chances are if you are the author you have sought people out who, well, would probably be interested in reading what you have written.
You can act exactly the same as a marketdroid in this respect and just spam forums and messageboards with "BUY THIS" messages or you could wonder, as a writer, whose eyeballs you want scanning your work and then you can, you know, go to these communities, integrate, check them out and, when you have something of interest: mention it.
At that point your marketing plan should be a coherent message that you can deliver to interested parties. In my experience consumers of entertainment come in two flavours. Those consumers who aren't buying what you're selling and those who like the elevator pitch but want to know more before they commit. By "know more" I think, particularly readers, like to cultivate some sort of knowledge or ownership of an author before they take the plunge. This requires one of two things. Either the author has to be "available" e.g. has a blog, visits online communities, tries to meet and greet etc. and have some good, relevant materials expanding upon the type of fiction they write. The other option is that the author implicitly "promises" future availability by having a large canon of work available for purchase (I would say 8-10 novels freely available for purchase would be minimum). If a reader can see that, should they buy novel x they can benefit from 7 to 10 more no-brainer book purchases then they are more likely to take the plunge.
In these days of the interwebs there should be some mixture of the two.
Free stories/books could contribute to this but only as a part of that strategy. Sometimes you end up with frustrating edge cases: I, for example, love one author's two free e-books (neither were ever considered for publication by a publisher but one was represented by an agent for a while) but his actual published works are generic detective stories while the free books are out-there speculative techno thrillers. If the dude was paid to write out there speculative techno thrillers I would be in the queue to buy each and every one but I'm not in the market for a cookie cutter crime thriller. I'm sure there are others who are happy with whatever he writes. None of it would be worth much if he didn't also blog, do speaking tours and just, generally, make himself available to fans.
So, as a way to make yourself more available it is a step in the right direction but it's definitely not much use on its own. I offer free downloads of some novels but as they are part of a plan I haven't started to put into motion yet nobody bothers with them and they certainly don't sell.
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