Wikipedia has a good article on the practice. http://en.wikipedia.org/wiki/Domain_name_speculation
And like with home properties, there can be flipping. This is when you own a domain name that later increases so much in value, you make a huge profit – i.e: people want it so badly that they’ll pay money for it.
There can even be hoarding. This is when owners don’t want to give up some cherished domain name at any price.
If you want a domain .com that someone else has, but seems to have neglected, you need to be cautious. If it expires and then becomes available, you’re in luck. There are free services available that can alert you when a domain name you want becomes available, like Dotster and Network Solutions. There’s also something called ‘drop catching’ an expired domain name, which means being alerted as soon as it becomes available. Generally, this means after the 40 day grace period, the 30 day redemption period, and the 5 day lock up, after which the domain is deleted from the ICANN database and up for grabs.
Then again, if the domain is locked and it seems to have been ignored for many years, the owner might just be holding onto it, looking to make a profit. You might want to do it through a third party and there are escrow services online who could handle that for you, but even then you have to exercise caution. What if the domain name owner doesn’t want to sell it at the price offered. You also have to beware of online escrow fraud.
Moniker says they offer secure domain escrow for buyer and seller. http://www.moniker.com/domainappraisalbrokerage/domainescrow.jsp
Does add some measure of protection, but there are no guarantees.