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No, you misunderstood what I said.
Geocities (and other free hosts) have large staffs to patrol sites, handle complaints, etc. They haven't been on the end of too many legal battles because they are very responsive about copyright complaints.
That being said, Geocities does not encourage people to hotlink images or videos and attach advertisements to this content, which is entirely a different game. In fact, Geocities is pretty good about hotlink protection. They certainly do not take the images or content posted on their site and logo it and offer it up to other sites.
To answer your question, "why can "insert host here" host files but i cant ?" The answer is you can host anything you want. But the idea isn't to be a host (not even like image revenue) but rather to "push" the content out in a manner similar to a YouTube video, but with advertisements attached (or commercial links)/
Have you considered for a minute why youtube has been very careful to avoid put advertisments into their coding that is used by blogs and websites? That would clearly be a point where they stop being a host and start being a content distributor, and that would pretty much knock off all their "innocent host" protection.
Don't confuse your idea with that of being a simple "host", because it just doesn't appear to be the case.
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