For me, the separation between hobby and work is more of a matter of responsibility than pay. If I feel responsible for some activity/task/project I would classify it as work. It does not matter if it is taking care of kids, growing a garden, being a board member of some charitable organization, or one of my free software projects: I do not get paid, and I like doing it, but I think of it as work rather than a hobby.
Building some software prototypes for ideas I have, that I count as a hobby. Reading all the books I do, however more time I spend on it than some work activities, I still think of as a hobby.