I have been blogging for about three months now and in that time I have visited a number of blogs.

A lot of them have blog contests running. Majority have prizes within the USD$100-200 tops.
I came across one that was offering a prize of USD$2500 which caught my eye (to check it out, click on the link on my blog Show Me The Money (link in signature).

What is the point of these contests?
Is it to promote a site and get traffic up?
What happens when the contest is over?

It's to help promote traffic as well as provide incoming links to the blog holding the contest.

I never try this before but I think this is a good way to expose your blog, increase traffics and make friends with others.

In order for your contest to work you need the traffic to begin with. It is a catch 22. You will get some extra traffic when you run a contest, but you really have to work for it. IMHO effort is better focused on readers that will return, not just for a contest.

BeachBum

a great marketing ploy, to get buzz happening.

what makes the world go around, money! people always ask themself, why should I visit your site??? What is in it for me?? and if you offer money and free cash prize giveaways get ready for an instant swarm of traffic to your site.

I recently did this On My Blog Here - $500 free Cash giveaway! and it worked like a charm. The winner sent me a cool comment as well, $500 bucks for answering one silly little question.

You can save a lot of money by getting involved in the niche community and just writing great content

Yah I think I have tried every contest known to man. All of failed to some degree