I found hosting on ebay for £1
Basically everyone that sells hosting this cheap are just resellers, one guy rents a server and sells space on as unlimited* to resellers for say US$10-20/year, then those resellers sell it on again, in this case for £1. The chain can go deeper and include what are called Master Resellers (can create reseller accounts) and I've even seen 'Alpha Master Reseller', so there could be 1-3 people between you and the actual admin.
You could be fine for a year or so but eventually the server's going to become slow and practically unusable. That said, if it's no real issue for you (e.g just hosting something personal that won't be used very often) then by all means take advantage of something that's almost free, just make sure you make regular back-ups (or whenever you update something) in-case they do disappear.
*Some will opt for the term 'unmetered', it just means that you can use as much space as you want but once the HDD is full that's it (some will add more space but it's never actually unlimited of course) and will typically have some sort of AUP where you can't store too many images, large files etc.