it's refered to as a pyramid cheme because of the way the user base grows out from beneath you...
this scam has been running since the dawn of time, and people rarely make any money on it,
this explains it better than I could
http://www.zyra.org.uk/pyraschm.htm
this thread goes further to confirm how and why it is a bad idea to enter such pyramid schemes...
and also confims the suspition that pyraids are illegal.
http://www.interleaves.org/~rteeter/pyramid.html
the site linked above said:
Both Ponzi schemes and pyramids are quite seductive because they may be able to deliver a high rate of return to a few early investors for a short period of time. Yet, both pyramid and Ponzi schemes are illegal because they inevitably must fall apart. No program can recruit new members forever. Every pyramid or Ponzi scheme collapses because it cannot expand beyond the size of the earth's population.
-- U.S. Federal Trade Commission (
www.ftc.gov/speeches/other/dvimf16.htm).