A man's reach should exceed his grasp...

What does "We pay $1,000 against a 25% royalty. (The royalty enters the picture with respect to downloadable versions of the work.)" mean?

I was surfing over to Hero's and Heartbreakers and there was a call for submissions for shorts. I've sold a few to the trues so I was thinking of seeing if I have something for this one, but I don't understand what "against a 25% royalty" means.
And I thought I knew everything. :)
These publishers speak a different language. I think it could mean they pay the thou up front then 25% after that is earned out. Hey if I got the thou up front I'd be happy to let the story sit and germinate. But what if it means something else? This makes me wonder if my story could earn more if I sent it somewhere else.
And then I saw something on Amazon called Kindle Singles. I'm not sure what that is? Single stories? Are they talking novellas? It says expressed in it's natural length...hmmm. I saw one at 30 pages. Most I see are selling at 1.99. Not bad for 30 pages. If you want a quick read or have a short attention span something like this might be good. I think this section, which doesn't seem to have a lot to it yet, will grow by leaps and bounds. I wonder how long (or short) a Kindle Single can be? Either way, putting a short up on Amazon might be a better pay off in the long run.
I've seen several places that want short stories but don't pay and I wonder why would anyone want to submit? Why not put it up on your own blog if you're not going to get paid for it?
Thoughts?