You're right about the term "vig" meaning "interest", as in a loan, in some contexts. When you borrow from a loanshark, for example, the interest you pay is known as the "vig". In the context of betting, however, the vig refers to the extra 10% that the bettor must put up as part of his bet, i.e. risk $11 to win $10. And no, the bookie does not charge the bettor any interest from the time the bet is placed until the time the event takes place.

As for your second question: The reason people are willing to risk more to win less is simple. In sports betting, as in life, while outcomes of events are seldom certain, their is a measurable degree of probability that makes one outcome more likely than another. Here's an example that will answer your question: Suppose Team A, which rarely loses, is playing Team B, which seldom wins. Team A is clearly the better team. As a matter of fact, suppose they've already played 10 times this year, and Team A has won 8 of those games If you or anyone else were contemplating a bet on the game, if the odds were 'even' you and everyone else would bet on Team A. Although a win for Team A is far from certain, it's certainly very likely. So to discourage evryone from betting on Team A, which, if they win, will guarantee a loss for the bookie, he establishes "odds" on the game, let's say three to one. That means if you want to bet on Team A, you have to risk $3 to win $1. You still think Team A will win, but if you make the bet 4 times, Team A has to win 3 out of 4 just for you to break even. But if you think that team A, under the same conditions, will continue to win 8 out of 10, then you don't mind putting up 3-1.

Am I contributing to the delinquency of a minor here?