an unregulated lottery would normally be something i would generally avoid, because i couldn't know for sure how many tickets were actually sold and at a minimum, the odds of winning would change as a result

but a lottery that uses a single receiving address per lottery draw means the bitcoin blockchain shows how many tickets were bought.  additionally, the proof of payment to the winner also appears in the blockchain.

assuming that the method of picking the winner(s) is based on a random event bitcoin becomes an awesome platform for running a lottery.

there are two problems though.  one is that the amount wagered is controlled by the lottery operator until it gets paid out.  maybe when these amounts get larger lottery operators will use some type of escrow.

the second problem is that this lottery requires the payout be sent to the originating address.  this means tickets should only be bought with funds sent from a bitcoin client.  if an ewallet service such as mybitcoin or instawallet even are used, someone else other than the ticket buyer will get the winning payout.

bitlotto is a monthly lottery that operates with full wager transparency as described above.  it keeps 1% of the amounts wagered (1% rake) and pays out 99%.  the algorithm ensures that there is at least one winner each month.  the draw is based on numbers from a national lottery.

btclottery is a set of weekly lotteries also with full wager transparency.  to win a certain number of numbers must match, depending on which lottery game was played.  it keeps 2% of the amounts wagered (2% rake) and pays out 98%.  the algorithms don't necessarily result in a winner, so each week the amount could rollover to a larger lottery size the following week(s).