Yes, people pay $20 to buy a WoW token from the cash shop which then gets sold on the in game auction house. That person gets in game gold (the amount fluctuates), and the person who bought the token from the auction house gets their choice of either $15 of shop balance or 30 days of game time.
Where do the tokens come from?
Are people buying them from Blizzard for real cash and then listing them in the auction house?
Yes, people pay $20 to buy a WoW token from the cash shop which then gets sold on the in game auction house. That person gets in game gold (the amount fluctuates), and the person who bought the token from the auction house gets their choice of either $15 of shop balance or 30 days of game time.
Sounds for me like Blizzard have taken over the role of the gold sellers themselves and with the same ethical standards.