A technical paper about one of the most active exploit kits around details how this kit works. The first portion of the paper by Gabor Szappanos, Principal Researcher at SophosLabs focuses on version 1.0.2 of the exploit kit which dates back to 2010. The Blackhole backend costs ranges from $1500 per annum to a few hundreds per week but a downloadable free version of this version is available from torrent sites! Compromised legitimate websites redirect users' traffic to malicious websites that are hosting exploit kits to infect users' machines with malware.
Download Sophos technical paper from here - http://www.sophos.com/en-us/why-sophos/our-people/technical-papers/inside-a-black-hole.aspx