What do you get for that $20-$100 price tag? Quite a lot. You get the kernel, dozens of compilers and debuggers, hundreds of applications (ranging from image processing to word processing to servers to clients to productivity applications to office suites to scientific applications to database applications to games to editors and much more), installation utilities, system management utilities, and lots of documentation, plus at least some tech support from the distributor.
Why is everything so cheap? Because it's almost all open-source. If someone charges too much, someone else can take the source code and make it available for less. The competition is fierce. You aren't buying the software so much as you're buying the convenience of not having to download it and compile it yourself. There are companies that resell distributions like this for as little as $1.99. The only thing you don't get from them is commercial tech support from the distributor. (For many people, the free, public tech support is plenty.
And almost all of this software comes with no license fees. You can borrow a CD from a friend and see if you like it before you buy your own. (Or just upgrade for free over the net.) There's even a website where people offer old Linux CD's they don't want anymore. You just mail them a postage-paid envelope and they'll send you their CDs for free. You don't get the most recent stuff like that, but the price is right.