Here's how this apparently works. Calls to rural Iowa are subsidized by you, the taxpayer. The subsidy is greater than the cost of the overseas call so AllFreeCalls pockets the difference. For more information on these details check out the comments on this post or here.
Only select countries qualify, but the include places like Canada, China, much of Western Europe and...especially for us in Kosovo, land lines in Serbia (Kosovo landlines use the Serbian country code so this should work).
This is a pretty great deal if you already have free or cheap long-distance service within the US. If you're not a Skype user, or if the folks you're trying to reach have lousy Internet service, making Skype impractical, see if you're country is included.
If you're outside the US, one TechCrunch commenter reports using this successfully with SkypeOut. In fact, if might try this with Skype's new unlimited calling plan for $14.95. Couple this with AllFreeCalls and your telecom costs just dropped to about zero.