Just curious, but how do people start a game publisher? What are their costs, how do they function or what are their average business procedures, what do they do for the developer, how much do they make, etc?

Theres alot of costs involved - in general just starting a business. Employee costs, distribution costs, packaging costs, art costs, finding titles, adveritising, marketing the games, etc. etc.

Granted an online publisher is easier to setup than a retail publisher, both still have big costs involved.

a retail publishing business is EXTREMELY expensive to set up and operate ... this is why in recording and computer games, there are very few successfull / large pulishers ... it is nearly impossible to compete with EA, Infogrames, etc for shelf space in retail stores ...