It's less of an auction and more of a gamble; I'd say it's a scam, if they weren't so upfront about the process. You pay for every bid you place (not just if you win), so you can piss away a tidy sum without ever winning a damn thing.
A similar site, Swoopo*, advertised on here quite a bit, so I checked it out. It and the bajillion other similar penny auction sites are all jokes; a quick trip down google lane will show you many unhappy customers and accusations of shill bidding to keep real people from getting anything but the shaft.
* - it looks so similar, I wouldn't be surprised at all if it were the same wolf in different sheep's clothing.