I have seen many auctions on ebay requesting a few pounds to join, and
then you will earn thousands. I was wondering if these plans have any
truth in them or if they are to be avoided?

Here is an article devoted to you specific question

http://www.wired.com/news/culture/0,1284,62226,00.html

and here an on line thread debating it
http://www.esato.com/board/viewtopic.php?topic=49321

The line betwee pure pyramid scheme
http://www.cockeyed.com/ebay/scam/laptop_pyramids.html

and MLM business is sometime thin, as elaborated here:


 ... How do you distinguish between a legal MLM and a Scam? What are
Pyramid schemes?
 How do you protect your hard-earned savings from going down the toilet? ... 
www.health-ebiz.com/mlm-scams.htm 


 ... Seminars for Fraudulent Business Opportunities, Pyramid Scams and
Trusts. ... lines,
 
www.crimes-of-persuasion.com/ Crimes/InPerson/MajorPerson/seminars.htm


Internet-based Pyramid Schemes Fraud Web Scams by E-mail
 
www.crimes-of-persuasion.com/ Crimes/Delivered/net-based.htm

The simple rule is this: Do you want to buy an item
or do you wan to start a *questionable* business?

If you want to buy an item, do not sign up for promoting someones
business instead.


Hedgie

Very informative. Led me away from fraudulent schemes.

Don't work.  Avoid them.  If you want to know why send me $5.00 and in
30 days you will recieve...

It is the classic pyramid scheme.

99.999% of those schemes (and the word scheme in itself should be a
warning) don't work or they do work upto a certain extend being that
the person who starts it will get some return out of it , they are all
variations on the pyramid scheme where there is one person on the top
of the pyramid raking in the profits and everybody else is left
holding the -empty- bag

A pyramid scheme is a system of selling goods where commissions are
paid to recruit new sellers. The commissions are based on the number
of sellers recruited. The right to sell the goods is sold to an
increasing number of sellers at lower and lower levels.
www.investor-info.ca/glossary.asp

A pyramid scheme is in essence an illegal financial scheme in which:
(1) participants are recruited by chain letter, by friends, or at meetings,
(2) a list of n names is displayed or distributed (often sold) to new
participants, and
(3) the payment of an "ante" to the top name on the list by new
participants is notarized or supervised they have been arround for a
very long time and are believed to have eveloped from money chain
letters in 1935.

The Federal Trade Commission (FTC) defines these types of schemes as follows

Pyramid schemes generally ignore the marketing and selling of products
and services, and concentrate on the commissions you could earn just
for recruiting new distributors." Pyramid schemes may or may not
involve the sale of products. Some multi-level marketing (MLM)
programs fall under this category and are related to so called Ponzi
schemes.

It is a fraudulent scheme where an investor buys the right to be a
sales representative for a "product." Those in the scheme early may
profit; those in late always lose. They always follow a variant of the
following people are recruited to make payments to the person who
recruited them while expecting to receive payments from the persons
they recruit; when the number of new recruits fails to sustain the
hierarchical payment structure the scheme collapses with most of the
participants losing the money they put in