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The way it works is that the server software is open for anyone's use, which means that server host companies sell servers based on player slots to essentially use their hardware and bandwidth. The majority of servers for COD4 on PC right now are being hosted this way (in fact, you can filter non-dedicated servers that are running on someone's PC when searching for one).
The way that it's going to be is standard console matchmaking. You don't have a server browser. You set up parameters of what maps and what ruleset you want to play (Search and Destroy, Team Deathmatch, etc) and it will pair you with a bunch of players that are also looking to play this gametype. Then it will asign the player with the best connection as the host, and everyone will connect to that player.
Advantages: You don't have to deal with the superdifficult (in Activision's words) interface of server lists.
Disadvantages:
1. The host will always have an advantage of not having any lag since he's not subjected to ping.
2. You will not be able to produce or play any mods for the game.
3. You won't be able to pick a server to play on because you like their custom rules.
4. There won't be admins who are banning the cheaters and artards on the spot, everything is left in the hands of VAC (Valve Anti-cheat).
5. Player cap will be significantly lower in games, possibly 16 players max.
6. If you don't buy a DLC, you will be kicked from the lobby if the game rotates to a DLC map.
7. If the host leaves, you will have to wait until another user "takes over" the functions of a host, which is interruptive to gameplay.
8. IW.net(their matchmaking system) will automatically pair you up with people of their propriotary SKILL rating similar to yours.
9. To play with friends you will have to create a "party" before going to play together. No more "join this IP", or Xfire support.
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