I'm using google's DNS servers (184.108.40.206 and 220.127.116.11). As far as I know (which is very little) all an ISP does is be a DNS server. What am I paying for?
You are paying for the Internet Service that your Internet Service Provider provides. That is, all data traffic that passes through their routers.
They pay to keep all their hardware running, lease the physical connection to your house (or similar for GPRS/wireless/satellite links), and pay for all the data you send and receive to other machines in the world, the bandwidth for which they purchase from trunking service providers.
You need to cover their costs, as well as pay them for providing the service at all.