DDL sites index the pages in you blog or forum, so when someone searches some download in a ddl site, all results from the sites who had submitted that particular download are shown, like this:
[SLIDE]http://screensnapr.com/u/6vn3ay.png[/SLIDE]
(got this by searching "linkin park" in katz.cd, only few are shown in the screenshot)
When you click on any of these results, it takes you to the page of the site that submitted it(within katz frame), and this way katz sends traffic to those sites. Similar with other ddl sites.
About lots of file hosting companies, it has its own pros and cons, good because it increases competition which is always good, bad because some shitty file hosts may pay a lot for uploading and uploaders will get tilted towards it leaving the better file hosts around.
From an uploader's point of view, its not really bad though.
I hope that helps
