Where does the money come from? This is a decentralized, incentivized content and curation ecosystem based on token seignorage with set and specific rules. The "money" at its base is actually a set of game tokens, which are distributed to creators and curators as rewards for successfully playing the game. What makes the system robust, however, is that the tokens have a real-time value because they are traded on markets. The markets allow the tokens to demonstrate their subjective value. This way, when one has 1 Steem token, that person can know what the value of their token is worth to other people. It's similar to how someone playing a video game could obtain a rare item by playing the game. If they have that rare item, then they could potentially sell it on video game item markets. Steem can be thought of as a game system for content, where the rewards people earn are video game tokens that have real market value and are easily tradable for bitcoin and USD.
Further background for understanding is that Steemit is a website much like Reddit, however, it is different in that it pulls its information from a blockchain and cryptocurrency database called Steem rather than a centralized, private database. In this way, Steemit is also analogous to other blockchain-based businesses such as Blockchain.info, which pulls its data from the Bitcoin network. Regarding its difference from Steemit, Steem is a cryptocurrency and the blockchain database that rewards posters and voters for bringing new information to the community. It is an independent entity from Steemit. The Steem networks' rewards paid to bloggers and curators is mining seignorage and it works the same way miners are paid to secure the Bitcoin network. Rewards paid to bloggers do not come from Steemit Inc nor from investment in Steemit Inc. There has been more than $3 million dollars worth of Steem tokens rewarded by the Steem blockchain to these creators and curators. Steemit does not and will not ever pay the contributors of the Steem network for curating and creating content. Steemit is not a middle man to any of the blockchain processes and the technology remains completely open source and transparent for anyone to audit and verify (Many software engineers are currently leveraging the open-source code to build their own applications on Steem. There are more than sixty so far.). Claims that there is somehow a scam or that money is from coming from new investment in Steemit are categorically false. Rather, the natural inclination of the platform Steem is to continue building and improving an incredibly exciting social media network that is decentralizing the value of the web and genuinely improving the lives of thousands of people around the world.