I remember it the same. VMWare server went free in early 2006, and Microsoft Virtual Server and Virtual PC followed over a period of some months afterwards.
I kinda wish that VMware would lower the price to their Workstation product. I like server for some things, but workstation is better for others.
Oh the horror! A company dominating it's market gave one of its products away for free! Where's Janet Reno when you really need her to launch an antitrust trial! /SARCASM