That is a contradictory statement on their behalf, yes. I have a couple of thoughts on that. It seems it might happen that are just starting out (like the case seems to be here) or those that are no longer properly maintained, perhaps for the reason that they're about to go under. I found one (indecentpics.com) about a year ago that I didn't link here since it said that their site is "adult friendly" on their main page, whereas their ToS were in a glaring and direct contradiction by telling that no adult pictures of any kind are allowed! Seemed like it was just generated from some sort of a site template and never properly updated.
I didn't link it here at the time since it seemed clear that it wouldn't last very long. I was right, it's gone now.
I don't know how the hosting sites generally make the money to support their services other than having premium paid accounts, but I would think that all the free sites include some sort of advertising.