is that you pay to bid in the auctions on Flutteroo. For £12:50 you buy 45 chances to bid, and the last person to bid in an auction wins the item concerned.
That means people do get items at very low cost, but only those who place the last bid. Everyone else who bids in that auction loses money, and that's how it all works - the operators hope that the losing bids cover the actual cost of the item and leave enough over for them to make a profit.
It's not illegal. You simply have to pay to bid, and some people get carried away. They may get a £200 camera for £10, but they forget about the £200 they spent in losing bids on previous auctions.