The free, web-based email and various Mac oriented online services were offered as a loss leader designed to advertise Apple and the Internet savvy new iMac. It was a bad omen that Apple so pointlessly stole the iTools name from an existing Mac developer's popular web interface product, but Apple isn't always known for suave finesse in naming its products. M. Jobs, can you bid adieu to the francophoney names like Exposé, Rendezvous, and Bonjour? Mon dieu!
So what is .Mac: an email address and a web hosting service, integrated with a password protected WebDAV server? That doesn't sound competitive when compared with various things you could get free elsewhere.