Owning your own host isn't cost free either, especially if you sign up with a provider and an account that doesn't have bandwidth limitations. In many cases it would be cheaper to pay PB $400 a month. The so called free hosting sites can be extremely limited.
Beyond all of that managing your own domain and host isn't a trivial activity. Especially when you consider hackers and other concerns with server management.
I'm not sure when the last time you checked pricing was, but I have 100GB of server space with unlimited bandwidth costing me around $10 US per month. Of course I also have domain registration charges in the region of $10 per year, per domain as well, but it's a relatively small price to pay just for email address continuity alone.
Putting aside a chunk of space for picture hosting won't hurt me and I'll just use one of my existing domains rather than register a new one as domain name for purely hosting is irrelevant. Hacking is virtually a non-issue with a small domain as well - they don't come up on hackers' radar and even if they somehow do, it's relatively trivial to pull the entire site down and upload a fresh copy.
I'm not against entities making money, it's what keeps the world turning after all, but for a company like photobucket to suddenly and without warning, modify it's core functions from free/cheap to $400 per year seems unscrupulous. It seems they figure there's enough people dependent on them now, and for most (like Brian and his 8000 forum pics for example) it's virtually impossible for them to switch services and maintain their existing content. I'm hugely speculating here, but I'm thinking it's a quick money grab, followed by a quick sale of the entire business while the figures look good, and ending with photobucket becoming largely irrelevant within a year or two.
I agree that normal users should never erase original content because they've uploaded to an external host. I use 3 point retention - my PC's hard disk, an external hard drive permanently hooked up to my PC for quick access (very important or I never get around to backing up) and external hosting (like youtube, photobucket, cloud, etc. and soon to be my own server). The two hard disks guard against physical hardware failure and nasty malware attacks, while the external hosting guards against fire, theft, etc.