Referring to the first answer above, I believe this is incorrect, unfortunately. Pixafy may be in violation of the OSL 3.0 terms, as I understand things. Since it's obvious they are offering a SAAS version of Magento that does not operate as the original and appears to be quite different in design and functionality from stock Magento form, since they are providing access to it, they must disclose the source code.
However, if they have never modified the core code of Magento (which is doubtful), then they would not need to disclose any code created that links or shares libraries of the core of Magento or functions purely as an extension.
My understanding of OSL 3.0, and almost everyone I see on the internet seems to not understand this (including myself for a while) but OSL 3.0 does NOT prohibit linking (extensions) to the core code and does not seem to imply that you have created a derivative work just because you created an extension and are running a SAAS environment of Magento using these extensions.
Even if you don't distribute binaries, if you provide access to the output of your software, you are still bound by the license terms and must provide source under the same license. Magento OSL 3.0 license requires the disclosure of modified core source code, even if the environment is accessed purely as a SAAS.
In short, distribution includes pure SAAS access to Magento, not limited to providing access to the files via a download or FTP. Don't modify any core file and provide a SAAS environment of Magento using these modified core files unless you are prepared to provide access to your modifications for free.
I spent many months going over and over forum posts and legal opinions including Lawrence Rosen, before it finally clicked and made sense regarding when you must disclose the source code for free and when you don't. Its all about the definition of a derivative work that determines whether you must disclose source code or not.
Does one really think that any website selling items using a Magento store that makes any addition to the site by way of extension or adding a module to the local or community folders would now be forced to disclose those changes? Of course not. Its only modifications to the core Magento files or files that contain the notice that the file is licensed under OSL 3.0 (almost always this notice is found on core files only).
Any Magento developer that follows basic good practice in coding would never touch the core code anyway so its not likely to be a problem for the majority of Magento site owners.
