Interesting responses, thanks. The problem with not having a confirmed reservation is curious. Do you think most of the mistakes are made by booking.com or by the hotels? Unless the hotelier was loading incorrect data (or, more likely, not updating it), why would booking.com sell a room that wasn't available?

It does seem pretty obvious to me that the main thing booking.com "brings to the table" is online, immediate booking of smaller hotels. Like if I'm looking for a room in a small town in Germany, booking.com might have 2 dozen listings (often for smaller, less expensive hotels) and other websites might have 3 or 4. You can see this if you look on an aggregator site like kayak.com. I would think that a traveller who was in a hurry or didn't feel comfortable knowing how to contact the hotel direct would use booking.com to make these reservations. And perhaps other hotels in these towns who saw their competitors listed on booking.com would feel like they should participate, too (even if, perhaps, they didn't like paying a hefty commission for the booking).

For many reasons, this doesn't strike me as the greatest business in the world -- and I don't see any barriers to entry of other online travel agencies doing it -- but it seems like that's their primary advantage now: small hotels that you can't easily book online any other way.