PEOPLE. This is clearly not intended as a business. Stop asking about the "business model." It strikes me as just being a cool side project that enables people to make websites. That's it.
Yeesh.
Yeesh.
The legal questions are interesting, through it highly depend on the country and political tendencies from one year to the next. In theory, I could run this kind of service in Sweden, and only remove content on order by a judge. In theory. In practice, there might not be any difference between hosting user generated content and simply having a website up hosting in ones own name.