Okey dokey... so how do fees work in Ethereum?
Or do you have some other clever distributed way of preventing flood-the-system-with-bogus-contracts DoS attacks?
Here is my understanding how it works, hope Vitalik can give a more precise answer.
A contract is associated with a balance. If the balance is 0 the contract will not be executed. A contract gets executed by sending a transaction to a contract. The tx needs to be funded, so I assume you cannot send a 0 Ether tx to a contract. That way you prevent to flood execution of unfunded contracts. So you have 2 times a fee in place to prevent attacks. The tx needs to be funded with a fee to activate a contract and the contract need to have some balance to get executed.
If you have an endless loop, the loop consumes with every step some fee and after a limited time the contract run out of balance and stop.
About fees:
http://blog.ethereum.org/2014/02/01/on-transaction-fees-market-based-solutions/