Contests now most often charge entry fees.  Sometimes this fee covers a subscription to the journal, if it's journal-run, or sometimes it gets you a copy of the winning book, which doesn't always make you feel that great.  Still, fees are a reality.  Nobody likes them.  In the end, however, if you are the winner, then you see what all those fees are doing--not just manuscript handling, but then the processing of the winning manuscript, its publication, its publicity, and so on.  Of course, you see this only if you are the winner.
There are some outstanding reference sources for finding out about contests, grants, and awards.  Two newsletter journals of special note would be
Poets and Writers Magazine and the Associated Writing Programs publication, The Writer's Chronicle.  A biannually comprehensive compendium of this information is offered by PEN American Center in their publication Grants and Awards Available to American Writers, though last source this does not comprehensively list contests.

  • ADVICE. Contests are worth the trouble.  They are indeed expensive, and often a quagmire of rules and stipulations, but they work, if you win.  They are certainly a gamble, but they are an investment in your work.  If you win a recognized contest, it's a little like the best part of a board game, going ten spaces ahead just like that.
  • It is common to hear of people who keep coming in second or third in contests, and this gets very frustrating.  However, in my experience, there isn't anyone I know who has been a regular finisher who hasn't gone on to win something.