I do not talk much about my dabbling in the microstock world, but I have had an experiment going on for about 2.5 years now and the experiment will end when I hit the 5 year mark. Since I am halfway through the experiment, it behooves me to let you know how I am progressing, and what I have learned along the way.
For those who don't know, let me briefly define microstock.  Microstock is a method of selling imagery to the masses.  The idea behind it is that there are many people out there who need imagery, but are not willing to pay 30 or more dollars to use the image.  Sites like Shutterstock and Fotolia, provide a way for these customers to download images at a fraction of what they are actually worth to use on websites or business reports and so forth.

http://www.shutterstock.com/pic.mhtml?id=282722792    A link to one of my shutterstock images.
OK, so it should immediately become apparent to you, by the above paragraph, that there indeed is a market for inexpensive images, much like there is a market for cheap carpet and furniture.  There are those who prefer or simply cannot afford expensive flooring and solid wood furniture.  Places like Walmart exist because of their economical selection, not because of the quality of their products.  This is why I often call microstock agencies the Walmarts of the photography world.  Because micros (what I shall call them from now on) charge so little, they are often looked down upon by the photography community, in general, and it is here that I want to spend a little time understanding both sides of the equation.  For micros it is all about volume.  They want to sell millions of images and charge very little.
In my 2.5 years of selling for micros, I have built up a fair portfolio (port) for wildlife photography, and this has allowed me to understand this marketplace better and how it both benefits and harms the photographer.  Below I will list the pros and cons as I see them.
  • Microstock forces you to think more about what makes a quality image.  This is a big one for me that I think quite a few people gloss over.  Because your images have to be tack sharp and noise free, you spend a great amount of energy thinking about making better photographs.  Not only that, but the competition is so fierce that you have to make "the great shot."  Except for isolated examples, you will produce better images and it will make you a better photographer.  In essence it also gives you a reason to shoot.
  • Getting into selling images on a micro is much easier than trying to get into "pickier" stock agencies like Offset.  Once you get a portfolio of about 10 to 20 images, you can submit your application and unless your images are out of focus or noisy, you will get accepted.  Although I have heard the QA has really slipped over the last few years.
  • Other than creating the photograph, you don't have to expend any energy to sell the image.  Yes, you can market your images by using tools provided by the agency, but you don't have to.  If your images are good, they will get purchased and you sit back and collect royalties.  It's really that simple, or is it?  I will leave that for you to decide.
  • You, as the photographer, will make peanuts!  Realize, you are the blue collar photographer of the stock world.  When you start with Shutterstock, you will start out making .25 cents an image for what are called subscription sales.  Subscription sales are just that,  they are customers who have purchased subscriptions, which allow them to download a set amount of images per month.  This is, by far, what most of the Shutterstock customers use.  It is usually the most economical for them.
     If you are lucky, you will start to get some "On Demand" purchases of which you will make $1.88 per image.  This sounds much better except, again, these are not the norm.
    Finally, if you are really lucky and your images are good, you will start to see a few "Enhanced Licenses."  These customers are those who buy your images to use in books, magazines or other media which requires multiple image licensing.  Here you will make more of what your images are actually worth.  You will make up to $80.00  an image.  Don't get too excited, these are not commonplace.  What this all amounts to are commission percentages around 20%. 

     I find this appalling, but there is not much to be done about it.  I think 50% commission is much more fair as we are providing the actual product they are selling.  They amount to the salesman.  How many salesmen do you know making 80% commissions?  Essentially, that is what stock agencies are.  They are glorified salesmen and they have turned the table on the one producing the product.
  • Selling photographs cheaply devalues photography in the long run.  This is probably the part of this whole system that saddens me the most.  In the end, all we are doing is feeding corporations and they are the ones who get rich.  We, the photographers, are willing to sell our images for peanuts and so the market will begin to devalue imagery.  In the end we harm only ourselves and others who sell art. I often compare this to participating in class action lawsuits.  The only real winner is the lawyer.  
  • Only certain genres sell well.  This is not really relevant to just micros, as any general stock agencies will sell more images of two businessmen shaking hands as they do great, sweeping landscapes.  There is just more of a market for imagery which explains and idea rather than just an image of something which is beautiful.  
  • The masses don't pick your images based on the fact they are stunning or well made.  You may be surprised which images sell the best from your portfolio (port).  I guarantee it will not be your best images that sell the best.  Most likely it will be a technically nice image, but it will be an image that appeals to the masses.  In the animal world, they are called pets.  Images of pets will outsell the most compelling image of a bear or elk.  Sad, but true.
  • The agencies don't give a flying flip about how much commission you make.  Why should they?  They are in it to make money and its all about the profit. If photographers are willing to sell imagery for peanuts then they know that they won't mind a low commission.  I think the solution to this is a guild, but with globalization, this becomes an impossibility.  Photographers in India, for example, are willing to work for much less than a photographer from the UK or America.  Having said that, an American and UK sponsored guild would at least put more pressure on them to raise commission and prices.
  • There are no guilds to force a fair price for the images.  I wanted to make this a separate bullet just so if you missed the above point, you might get it here.
  • Not sustainable as a living in a 1st world country.  In the end, my experiment so far has told me that this is not sustainable for a living or as a second income for a first world family.  If you don't believe me, ask those who have been doing it for 10 years, with 7,000 images in their port. They will tell you that you can make money, but it is not really a living.
  • Reviewers are pretty much untrained.  Reviewers have received a bad reputation for rejecting images for focus when focus is not an issue.  They are not generally photographers and so they do not know the "rules" about what an in focus image is.  In wildlife, for example, I might have a very shallow depth of field.  The eye and the head of a bird might be in perfect focus, but the end of the beak is not.  Often images like this are rejected, making it even more difficult to make money.  The deck is most definetly stacked against us.
If you want to fiddle around and sell your images online for small profits, or just for fun then micros are the place for you.  Personally, so far, I find that this is not a sustainable option for even a second income.  It will give you money to help you support your hobby. For example, buy new lenses or cameras, so  If that is all you need then here you go, enjoy. Realize also, that you still have to pay taxes on all you make.  Start running the numbers, and you will find out just how silly the income really is from selling stock.  Specifically look at cost of equipment, computer hardware and image editing software and it really becomes something laughable.  I think if we were making about $2.00 an image and we could get the public to pay this, then this would be sustainable. 
So you may be asking yourself: then why is he still selling given so many cons?  Well, that's a great question, and like I said, this is an experiment in the economy of the whole thing.  So far my experience shows me this is a bad choice, but I am willing to give it more time.  Perhaps at the end of 5 years and the end of this experiment my ideas will have changed and so I leave this post with some optimism for the future.