If Mozilla is free, how do they make money? Just donations?

yes.

and companies like AOL put a lot of money into it. netscape is mozilla-based, which is a commercial browser(ads)

[Thread Moved to Mozilla Discussion]

I think sun gave them a bunch of money also. However, most (all?) of the developers do it for free, not as a job.

I suppose other companies pay them to use their rendering engine... like netscape (not sure about this). Also, the browser is open source and everyone can contribute a little.

I don't understand why they don't even put ads on their website. They can make a lot of money by displaying google ads.

its open source and a non-profit organization so they can't get paid to use the rendering engine. Mozilla relies on donations.