According to the policy, add-ons must be free of charge, may not solicit donations, and their code must be completely visible.
This means some leveling mods that charge for their use are now against the rules. Essentially if you develop a mod it has to be released and distributed for free – no charge is acceptable. And for those thinking "well, the developer could just charge for the download service then." Not true.
The complete statement after the break.
"All add-ons must be distributed free of charge. Developers may not create "premium" versions of add-ons with additional for-pay features, charge money to download an add-on, charge for services related to the add-on, or otherwise require some form of monetary compensation to download or access an add-on."
That is pretty specific to not allowing add-on developers to gain any money from the actual add-on. While this does not include revenue from ads on the developer's site, the policy does go on to say that add-on may not include advertisements or solicit donations in-game. They've pretty much covered up every avenue available to make money off the actual code.
The final point on the add-on policy says that Blizzard has the right to disable add-ons as they see fit. I read this in two ways: they reserve the right to disable all add-ons, and they reserve the right to disable certain add-ons. Of course this should be understood given that WoW is their game and they can do pretty much whatever they want with it, but seeing it spelled out is a tad... unnerving.
You can read their full add-on policy below, or head over to their site.
World of Warcraft User Interface Add-On Development Policy
With the continuing popularity of World of Warcraft user interface add-ons (referred to hereafter as "add-ons") created by the community of players, Blizzard Entertainment has formalized design and distribution guidelines for add-ons. These guidelines have been put in place to ensure the integrity of World of Warcraft and to help promote an enjoyable gaming environment for all of our players - failure to abide by them may result in measures up to and including taking formal legal action.
1) Add-ons must be free of charge.
All add-ons must be distributed free of charge. Developers may not create "premium" versions of add-ons with additional for-pay features, charge money to download an add-on, charge for services related to the add-on, or otherwise require some form of monetary compensation to download or access an add-on.
2) Add-on code must be completely visible.
The programming code of an add-on must in no way be hidden or obfuscated, and must be freely accessible to and viewable by the general public.
3) Add-ons must not negatively impact World of Warcraft realms or other players.
Add-ons will perform no function which, in Blizzard Entertainment's sole discretion, negatively impacts the performance of the World of Warcraft realms or otherwise negatively affects the game for other players. For example, this includes but is not limited to excessive use of the chat system, unnecessary loading from the hard disk, and slow frame rates.
4) Add-ons may not include advertisements.
Add-ons may not be used to advertise any goods or services.
5) Add-ons may not solicit donations.
Add-ons may not include requests for donations. We recognize the immense amount of effort and resources that go into developing an add-on; however, such requests should be limited to the add-on website or distribution site and should not appear in the game.
6) Add-ons must not contain offensive or objectionable material.
World of Warcraft has been given a "T" by the ESRB, and similar ratings from other ratings boards around the world. Blizzard Entertainment requires that add-ons not include any material that would not be allowed under these ratings.
7) Add-ons must abide by World of Warcraft ToU and EULA.
8) Blizzard Entertainment has the right to disable add-on functionality as it sees fit.
To maintain the integrity World of Warcraft and ensure the best possible gaming experience for our players, Blizzard Entertainment reserves the right to disable any add-on functionality within World of Warcraft at its sole discretion.
Edited to clarify a few things.