[derekp7]

Well, to get to the point of being interviewed, you had to have some education (either formal or self taught, or both). This involved writing a lot of code (homework assignments, etc) that you didn't get paid for. And you had to write / polish up your resume, again without getting paid for it. And you had to drive to the site without compensation (unless the place is big enough to fly candidates across country for the interview). So why would actually demonstrating your competence raise a red flag? Either they like what you did and you get hired (in which case you are getting paid for the work), or they don't like it, won't use it, and it is no worse than putting a bit of work into a homework assignment that you ended up getting a C on.

[s73v3r]

A for profit company isn't benefiting from those activities, though. I can easily see a situation where a less than scrupulous company brings in a bunch of candidates to do this in order to get free labor.