I still play this game once in a while... it uses a similar client to LotRO's DX10 engine but it's slightly more an FPS game (which is kind of weird since it's based on a turn-based game). Stopped playing recently because they stopped releasing content while they fought with Atari to make it a F2P game.
From what I understand the F2P/DDO store, F2P means you get most of the races for free (not warforged), most of the classes (not monk or their new one - favored soul is the rumor), and then all of the low level quests. Then sort of like D&D they're modulizing the higher level encounter areas - most of the new ones have an explorer zone and 4-5 quests and sometimes a raid. To get into each of these "modules" you'd either need to be subscribed, pay points ($$$) to "buy" that module, or have someone who's subscribed and has their stipend of monthly points get you a guest pass. Sounds like you can also earn points by playing the game... so you could get into some of the modules just by playing.
Sounds like they actually have 3 tiers: currently subbed, was once subbed, and fully F2P newb. Looks like you have fewer restrictions and get more character slots if you were ever subbed to the game compared to F2P.
As to why they've gone F2P... Turbine (which has WB as a majority owner) is rumored to be making a Harry Potter MMO. If there's any franchise that supports truckloads of microtransactioned cosmetic ****... that's Harry Potter. There's also a hope they can get more subs if they can get people back in to try a game that's definitely gone a long way since the initial release. If nothing else... at least it now has Dragons in a D&D game.
Here were my thoughts on DDO a few months ago with some screens: