While everything in Transitional Man's writeup is true, so much more can be said.
Caveat: the following is written from a US-centric viewpoint. I'm not sure if Britain or Australia have "ambulance chasers". It's my understanding that New Zealand does not have such beasts, because they nationalized their tort system, replacing the ambulance chaser with a government paper-pusher on salary. I'd be interested to hear from Kiwis whether this constitutes any improvement.
The good old days for lawyers weren't all that good for the middle class, who couldn't afford lawyers. Oh sure, graduates of law schools could more easily find jobs and keep them, with nice, reputable firms, and were not forced out on the street with a "will-litigate-for-food" sign. But firms carried around complete idiots and imbeciles as partners: one thinks of the stereotypical "rainmaker" who has no legal skills whatsoever, neither a scholar who can write briefs nor an actor who can sway a jury, but who made an excellent golf partner and could drink like a fish. These guys would be sent out to the country club to play golf and schmooze clients. This type of practice assured, however, that only big corporations or the most wealthy individuals could afford lawyers.
Those were the days. Today, as Transitional Man notes, there are enormous competitive pressures. The number of lawyers in the United States has sky-rocketed since Baby Boomers, including women, started graduating from law schools in great hordes. The legal profession, for some reason, attracts the second-rate. Beauty-pageant contestants don't go to MIT or Cal Tech: they go to law school.
However, in addition to the sheer increase in numbers, there has also been a trend toward "commodification" of legal services. You see this mostly in car-crash cases, hence the term "ambulance-chaser". Insurance companies have never been able or willing to adjust motor vehicle accident cases promptly or fairly. On the other hand, old-style law firms, which could force the insurance companies to pay up through litigation, were not staffed or equipped or structured to deal with the flood of small tort cases that came with Post-WWII prosperity and our suburban two-cars-in-every-garage lifestyle. Even taking the traditional one-third of the recovery as a fee, they manage the cases so inefficiently --after all, they have to pay Joe Partnerson to drink all day and schmooze with the widget-factory guys-- that they lose money on simple tort cases.
Try calling up your fancy-ass big law firm with the names of dozens of lawyers on the letterhead, and get them interested in your car crash case. They're not very nice, are they?
Enter the "ambulance-chaser". He (they usually are male, for some reason) doesn't have to be the smartest guy, or the slickest mouthpiece, but he has to be an energetic entrepreneur, and an efficient manager. The secret to success is high volume, low cost. He's the Crazy Eddy of law.
Rather than surrounding himself with other high-priced lawyers, who charge a lot to produce little, you hire a lot of secretaries, paralegals, and investigators, and you train them hard to fit into your little niche. And if they happen to be cute females, so much the better. Think Erin Brockovich. If you do it right, you have a specialized, highly-skilled, well-oiled, low cost workforce that is much more pleasant to deal with than a room full of lawyers. In fact, your lower- to middle-income clientele would much rather talk to your staff than that snooty bitch receptionist at Dewey, Cheetham, and Howe.
Now for the real challenge. The ambulance-chaser has his big, hungry legal machine ready to chew up those little car crash cases and spit out one-third contingency fees. He's got to feed the beast. That's where marketing comes in, including good old fashioned ambulance-chasing: getting names, addresses and phone numbers of injured people, and contacting them as quickly as you can (or in most states, as quickly as the law allows: in New Mexico, for example, it's illegal to solicit legal services for 24 hours after an accident or while the crash victim is still in the hospital.)
Marketing is everywhere now. Even I get "chased". I'm an appellate lawyer who also does a fair amount of consulting for those car-crash guys (they tend to be good businessmen but not very good brief writers). When I lose a case in the United States Court of Appeals, it's public record, and the buzzards start circling. The next step is appeal to the United States Supreme Court. The Supremes are really picky: you can't just print out a petition for writ of certiorari on your laser printer. Oh no. You have to get the damn thing offset printed in a little booklet. (If you look at the .pdf files of recent Supreme Court Slip Opinions at www.supremecourtus.gov you can see the size of the pamphlet: they don't print 'em that way because they like big margins and lots of white space.) So every time I lose an appeal, all the booklet printers are in the mail, on the fax, literally at my doorstep.
This is capitalism, this is a free market: I need them, they need me. IMX: I'd rather deal with solicitations than a government bureaucracy.