It's a perfectly legit offer, and everybody who is eligable should take advantage of it.

We've used them for fundraising for a non profit, where all the members refer each other for the $25 sign up bonus and the $10 referral bonus, and then give it back to the group.

They do it for one reason - It brings in customers. The average bank spends $63 to bring in one customer. Advertising, support, etc. ING gets around all that by just paying people $25 to join, saving a ton of money (or $50 at tax time). I don't know anybody who has signed up with them that still isn't banking with them. They get you in the door, and they keep you.

If it matters though, and it does for some, all the free money is reported as interest at tax time. I don't care, I'll gladly pay a few pennies on it, but for some it does matter.