One popular method is to make a dollar in profit from each of a million people. Or a penny from a hundred million. This is the China strategy. It almost never works.
It almost never works because the challenge of reaching that many people is just too great. It's too risky and too expensive. Doesn't matter that you're only hoping for a dollar or a penny. The price isn't the challenge, it's the difficulty in spreading your idea.
Far easier to make a thousand dollars from each of a thousand people, or even $10,000 from a hundred organizations.
I'm confused by Seth's assertion that, "the challenge of reaching that many people is just too great." On the contrary, never before has it been easier to reach people—over a billion people. The trick is saying something interesting enough that they'll listen and selling something compelling enough that they'll buy.
We sell Spanning Sync using what Seth calls "the China strategy". Our marketing budget is effectively zero dollars1. We don't do any advertising. Instead, we rely word-of-mouth, third-party reviews, and customer referrals. Yet we have thousands of customers in dozens of countries, each of whom has paid either $25 or $65 (for a one-year or lifetime subscription).
We also have corporate and educational customers who have purchased hundreds of licenses for thousands of dollars at a time, but given the frictionless way in which we can process individual transactions it's actually easier and cheaper for us to sell 1,000 $25 licenses than do a single $25,000 deal.
So how to make a million dollars? Create something that can leverage the Internet to drive your transaction costs to near zero and is interesting enough that other people will promote it for you for free and compelling enough that people will pay for it.