Some are, some aren't... If you want to reach a wider audience with your work (i.e. better galleries/publications/etc.), you need to develop a good CV. One way to do so is to enter, and be accepted, to competitions. In order to pre-qualify entrants, they usually have a fee. Sometimes part of the fee will go to an accomplished juror, in an attempt to add cachet to the competition. If there is a physical show involved, some of the money may go to the expenses of the staff needed to hang the show, as well as publicity, and whatever refreshments are offered at the opening. Remember, though, if you are accepted, you'll need to pay to ship your work both ways (unless, of course, it sells), so a $30 entry fee can end up costing quite a bit more.
I can't speak to "on-line" competitions, as they seem a bit shady to me...
Michael- the competition you posted seems legit, to me. As a member of a few Art Leagues, I have witnessed the effort put in to their competitions. This one has a physical show, cash awards, and contact information. Whether the manner in which they contacted you was ethical, I have no idea. But, Art League competitions are a very good way to dip your toes into the jury process.
A few years ago I was given some good advice about entering competitions:
1- Call and ask how many entries they had the prior year. If they won't tell you, be wary.
2- Research the juror(s). See if your work falls into their area of interest/style. It will improve your chances of acceptance.
3- Enter large pieces in local (drop-off) competitions. Smaller pieces in competitions which require shipping.