As decribed by Larry Setzler from eWeek.com, unscrupulous registrars are utilizing this loophole in a massive "tasting" or "kiting" scheme where names are temporarily registered and ad-filled parking pages created. If the domain names receive enough hits on their temporary sites, the names are kept, the remainder are dropped under the Add Grace Period (AGP) and any registration fees are refunded.
The AGP was originally intended to allow domain registrars to cancel domains due to typos, fraudulent use of credit cards and so forth. Registrars pay $6 to Verisign per domain registration, but the entire fee is refunded if the name is dropped within five days - no questions asked. Registrars who continually abuse this system are never questioned and millions of domains are registered, then dropped every month.
Bob Parsons, outspoken CEO of GoDaddy, has blogged about about the issue, even offering proposed solutions, yet ICANN and Verisign refuse to do anything. This is a rapidly growing problem that needs to be addressed.