Basically, the hacker uses the 'BotNets' described earlier to try to sign up to for thousands of email accounts. Free Providers can do a few things, like limit how much email a person can send at a time, but when thousands of accounts all send just a few messages, it is harder detect the spammers. And you can't really point a finger at a single email provider, as all of them have suffered from this at one time or another. They try to stop automated sign-ups, but the hackers keep finding new ways around this.
Until the free email companies solve this problem, your ISP is forced to use some spam filtering techniques along with the normal virus and other filters. MagicSpam still allows your current filtering technology, (eg. Spam Assassin) to work behind it to stop this type of spam, but MagicSpam does not include content filtering at this time. MagicSpam concentrates on identifying the before it reaches the filters. If you get this kind of spam, report it to your ISP. It will be up to the ISP to put pressure on the free email providers to make sure they stop it before it leaks out of their servers.