Names that are registered with Godaddy and left to expire are summarily taken over by Godaddy and sold via an aftermarket process, with the presumption that the registrant 'doesn't want it anymore'. First, an auction process starting with a minimum bid of $10. If the name receives no bids, then it goes into Closeout status, where the price starts out at a fixed $9 Buy It Now and is progressively lowered. If no one bids in the auction and no one buys it as a closeout, then Godaddy releases the name altogether and it is eventually deleted and released back into the general registry.
What you have to keep in mind is that they begin the aftermarket sale process prior to the exhaustion of the previous registrants rights to recover the name. What this means is that names purchased via these Godaddy aftermarket methods aren't released into your account until the previous registrants rights have fully lapsed (in order to prevent them from transferring you a name, then having the previous registrant reclaim it)
In order for the previous registrant to recover the name from expiration, they have to pay rather stiff fees and penalties and FAR more often than not, they don't recover those names... But they do recover them just often enough that Godaddy doesn't release the name to the aftermarket purchaser until all rights of the previous registrant have been exhausted.
I've actually bought names that have been redeemed before, so I don't even bother getting my hopes up until the name is in my account.
The entire godaddy aftermarket plays on a few critical knowledge gaps. One is the lack of understanding that domains have 'value' , particularly amongst many early registrants who bought great names long ago and don't realize that today, they're worth money. Bobs Auto Shop in Kileen, Texas registered some great generic name in 1997, Bob retired last year and sold the shop and doesn't realize that "AutoRepairShop.com" is worth anything to anybody... Of course, Godaddy does, so instead of letting that name expire and it going to Enom, Pool or Snapnames via their sophisticated dropcatching process, they withhold it and auction that name off to the highest bidder.
The other knowledge gap godaddy preys on is that of 'domainers', who impulsively and incestuously circulate low-caliber crap names amongst each other, even though they don't stand a chance in hell of ever making profit from them... Keyword-tenuous names with roasted end-user bridges, backwater brandable names that earn no parking revenue, but the 'domainer' never develops it, so when his enthusiasm of ownership dies down, he lets it expire and it's passed onto the next sucker with 'big ideas' of his own... the only thing accomplished here is shoveling more money into Bob Parsons pockets.
On the other end of the knowledge gap, you have people who buy the genuinely good names via the aftermarket and immediately resell them via a higher profile domain auction, passing on that hot potato to the next sucker and grabbing their chair before the music stops. I see this all. the. time. Name sells for (X) in a godaddy expiration auction and two months later, is in a "Great Domains Premium Auction" for 10X the price. LOL. Idiots.
