I remember reading an interview of CEO O`Leary ( hope I got the name right ) where he emphasized the importance of add-on services, from accomodations to the aforementioned excess baggage. Of course they mainly leave those to partners but then charge them for linking to or advertising directly on Ryanair`s webpage.

Another factor is that they've built a strong brand among teens and twenty-somethings, right up there with MTV Networks and Coca-Cola. I believe a lot of "backpackers" will choose Ryanair even if could fly with a "traditional" airline for the same price because of the youthful image and succesful branding.