As a parking and transportation planner, I often have to explain how paid parking is a tool that encourages good behavior. This is especially true with on-street parking, where a fee encourages people to park more and drive less. By that I mean paid parking causes greater turnover of the spaces, resulting in an increase in the availability of spaces and the reduction of congestion-causing cruising.
Dr. Donald Shoup, professor of Urban Planning at UCLA, has written extensively about this in the "The High Cost of Free Parking," and eloquently illustrated the point during an interview with Mark Gorton of the Open Planning Project on Streetfilms. Although they use NYC as the backdrop, I believe the thesis holds true for large and small communities alike.