DAVOS, SWITZERLAND (FORTUNE) - Eric Pooley reports: If a session at Davos isn't absolutely great I start to wish I was up on the mountain instead of down in the Congress Center. Right now all thoughts of skiing have been banished: Bill Gates, Eric Schmidt, John Chambers and Niklas Zennstrom are talking about the next phase in the tech revolution, and how they're making it pay.

Zennstrom, who recently sold his Skype Internet phone service to Ebay for $2.6 billion, says that Skype has been in business for 3-1/2 years... and in that time has signed up 75 million users. I'm floored by the sheer scale of that, until Gates brings us back to earth. He jumps in and asks, How many of the 75 million are paying customers? Zennstrom doesn't say (or mumbles it out in a way I can't catch) but their exchange launches a terrific conversation about building free Web products that generate truly enormous user bases then monetize them.

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The free model, observes Google's Eric Schmidt, "generates a great deal of good will for your brand." (FORTUNE is deploying the concept right now on this Web site.) To monetize it, or course, you either sell ads against the eyeballs (like Google and this Web site do) and/or get a subset of your free users to pay a fee for enhanced service. (Hotmail and Skype do it this way). Get enough folks to pay, say, $30 a month, says Gates, and pretty soon you start to have a business. You can have one group of employees servicing the free base and another group figuring out how to monetize them. "It's neat," he says .They all nod.

Other revealing moments:

Eric Schmidt on how Google (Research) made its China self-censorship decision: "We actually did an Evil-Scale and figured out which is less evil" -- not going into China at all or doing what Google did. "We decided this was less evil." Someone points out that Google's motto is Do No Evil, not Do Less Evil. (In fact, the motto is "Don't be evil.") Schmidt says he doesn't want to get caught up in semantic debate: "Our principle is to serve the end user. And there are millions of people in China who in our humble opinion will benefit from using our products."

Schmidt on Google's core mission: "When we say our job is to organize all the information in the world, we mean all of it." The company isn't backing away from its controversial attempt to digitize all the books in the world -- but it's moving slowly while dealing with recalcitrant copyright holders. Google is now trying to index all books in print and link the index to online stores so folks can buy them, and it says copyright will be protected. (Google VP Marissa Mayer calls this digital books project "Google's moonshot -- we don't know how we're going to get it done, but we're going to get it done.") Listening to these folks, you believe it.

John Chambers on the evolution of how he works: "When we started [Cisco (Research)], I communicated with my people mostly by walking around. Then it was with e-mail. Now it's with video-on-demand. That's how I communicate. When we do this conference five years from now it'll be like Star Trek. It'll be 'Scotty, beam me up."

I certainly hope not. Then there would be no excuse to go up the mountain, listen to great conversation, and then maybe sneak off to ski.

Eric Pooley is the managing editor of FORTUNE. Feedback: epooley@fortunemail.com

Justin Fox reports: The gradations of status at the World Economic Forum are many. There are the legions of worker bees conscripted by the WEF to work the conference: usually supersmart, superambitious young people vastly overqualified for what they spend much of their time doing: running incessant errands, holding the hands of conference participants, and passing microphones around meeting rooms. Someone described them to me as the equivalent of Congressional staffers, and that sounds about right. Their badges come in various shades of blue.

Then there are the working press, who get to attend some WEF events but not the really interesting ones. Their badges are orange. Then there are security people, aides to really important participants (less important ones, such as Congresspeople and run-of-the-mill CEOs, don't get to bring staff), and various other categories with badges in various different shades.

It's among those who possess the white badges bespeaking full Davoliciousness, though, that the status game gets really interesting. At the lowest rung are spouses, girlfriends and partners of WEF participants, who get to join in on all the fun stuff and avoid actual work if they want, but are condemned by their badges to the soft bigotry of low expectations. While everybody else's badges say where they work, the spouses' are left blank -- even though many of them have jobs far more impressive than mine.

Most of the "media fellows" are pretty far out on the fringes too, but a few journalists take on starring roles, moderating lots of discussions and sometimes offering up expert opinions of their own. Tom Friedman of the New York Times and Fareed Zakaria of Newsweek have the highest profiles in this regard, although my FORTUNE colleague David Kirkpatrick doesn't do badly for himself either.

The badges also identify membership in a bunch of subgroups: There are Technology Pioneers, Social Entrepreneurs, Young Global Leaders, to name a few. In the interest of full disclosure: I am a Young Global Leader. Not an actual young global leader, of course (I'm almost 42, about as parochial as the next guy, and don't lead anybody that I know of, except maybe the kids on my son's soccer team last fall), but it does say so on my Davos badge. Which is certainly better than having it say "media."

Then there are the corporate types. This conference is put on for their benefit, they play a big role in shaping its agenda, and many of them operate here in an elite realm of private meetings and private meals and private parties closed to the rest of us. But that's balanced by the fact that they (more accurately, the shareholders of their companies) have to pay through the nose for the privilege of being here (all of us have to pay for rooms and meals, but corporate participants are hit with huge additional charges). "We paid $250,000 for a dorm room," is how two executives of a major U.S. tech company put it to me.

Davos, contrary to image of ultra-elite resort conjured up by the presence here of the WEF meeting, is actually something of a working-man's ski town. There are only a couple of really fancy hotels, and the rooms there all get snapped up by presidents, prime ministers, and the really big-time magnates and moguls.

That's who generally tops the status food chain here: Bill Gates, plus whichever really important government officials deign to show up. President Bush is not a Davos kind of guy (unlike his predecessor, who is scheduled to speak Saturday), and Condi Rice decided to videophone in her contribution Thursday, much to the relief of the WEF staffers who would have had to find hotel rooms for her massive entourage if she'd made the trip, so the big political stars have been new German chancellor Angela Merkel, UK Chancellor of the Exchequer Gordon Brown, Pakistani President Pervez Musharraf, and UN Secretary General Kofi Annan. (I'm sure I'm missing a few others.)

In a nice reflection of how our world now works, though, the biggest stars of all here this year are Angelina Jolie, in her function as a UN goodwill ambassador, and Brad Pitt, who I presume is wearing one of those spouse badges that doesn't say what he does for a living. I haven't come across them yet, but news of sightings Thursday shot through the Davos community and the global media. Bill Gates, whatever. Brangelina, now that's something interesting.

I wrote yesterday that bloggers aren't here. That's not quite right: The U.S. political bloggers who have been causing the most headaches for the mainstream press aren't here, but lots of others are blogging. One of the most prolific is Loic le Meur, an executive vice president of blogworld titan Six Apart. And there are surely lots of other people are doing it in their spare time, like Laura La Gassa, proud possessor of a spouse badge.

Feedback: jfox@fortunemail.com

Thursday's dispatches from Davos: Google's CEO Schmidt speaks on the China controversy; old media take a starring role; and why Iraq isn't front and center.