You can make gold just playing the game, I often just full clear act 1 with a lot of gold find gear and make about 600k + drops.
I think they nerfed the pots so you don't get quite as much anymore though.
But yeah, it's a market. People make gold in the game, buy something they want on the auction house. The seller of that item then buys something he wants on the auction house. If I'm on my Witch Doctor and I find a good monk item, I put it up on the auction house, somebody that wants it buys it, then I use the money to buy a good witch doctor item. Whoever I bought the witch doctor item from then goes on to buy something he wants.
There is a gold sink as the transactions continue on and on, but people continually make gold from farming etc and that easily outpaces the transaction gold sink.
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The batman villians all seem to be one big joke that batman refuses to laugh at - SantaRPG