[loup-vaillant]

Last time I've heard the term "peering", it didn't describe an exchange of money. Just an exchange of bits, where the peering partners set up a link and send data to each other.

Transport however is indeed traditionally paid.

As for paying someone to send data destined to their network, that's weird. Unlike transport, they want that data, why would you pay to deliver it to them?

[krageon]

And how do you believe those peering agreements are reached? What moves people to peer with each other?

[ojilles]

Mutual beneficial outcomes, without exchange of significant amounts of money are totally possible.

As an example, AMS-IX is completely non-profit, see: https://www.ams-ix.net/ams/about-ams-ix

[Edit: realised I didn't actually answer your question: it is much cheaper, at scale]

[throw0101a]

Does there have to be an explicit agreement? Why can't both parties simply advertise via BGP and let the algorithm sort it out?

If an online service can determine where the majority of its users are network-wise, then they'd set up a mirror at the closest IXP.