Let me explain; when you buy some land in the outer regions of your location - you generally are able to get it cheaper as it is further from the city, without infrastructure and population is low. You buy the land and wait for time to pass and the value to increase as the 'urban sprawl' occurs - population and traffic are driven towards your land. Hence you have a higher value and are able to make money on your land.
Building a niche website (in an area with little on-line competition) is very similar to this in my mind. You register a domain for your niche, (www.godaddy.com - $2 US for a domain!) and you begin to generate stories, journals or reference photos for instance on your website. Now initially you will have very little traffic and obviously a limited revenue stream from the site. However, as you continue to add 'daily and unique content' - (as in your own words and articles, not copied from elsewhere) the search engines will begin to discover your website (assuming you have built up links with other sites) and the value of your patch of dirt on-line starts to grow.
As you add more unique articles there is more chance of people finding you through search engines when they key in certain terms. With every article your value grows. As your value grows, so does your Google Page Rank and the opportunity to make some revenue from systems such as AdSense or Affiliate Marketing.
The final angle is the option to sell your website. Just like 'real estate' you can use your on-line patch to generate money for you OR once it achieves great heights - you can literally sell the whole website (your total article database) to another on-line buyer for a handsome sum (provided you have successfully built up good content) - this is another angle that can generate large money and allow you to create another successful niche!
