There are other commercial models using cross-selling such as multi-level marketing (MLM) or party planning which are perfectly legal and sustainable. Most pyramid schemes take advantage of confusion between genuine businesses and complicated but convincing moneymaking scams. The essential idea behind each scam is that the individual makes only one payment, but are promised to somehow receive exponential benefits from other people as a reward. A common example might be an offer that, for a fee, allows the victim to sell the same offer to other people. Each sale includes a fee to the original seller.

Clearly, the fundamental flaw is that there is no end benefit; the money simply travels up the chain, and only the originator (or at best a very few) wins in swindling his followers. Of course, the people in the worst situation are the ones at the bottom of the pyramid: those who subscribed to the plan, but were not able to recruit any followers themselves. To embellish the act, most such scams will have fake referrals, testimonials, and information.

Although pyramid schemes have been declared illegal in many countries, they still persist in various forms, nowadays usually by having a cover business, a product or service.

http://en.wikipedia.org/wiki/Pyramid_scam

But I assume your definition is correct where if one person does work and gets paid (either a salary or commission), someone "above" him/her (usually the boss or the owner or both) are making profits.

But when people use the phrase, "that company is pyramid", they usually mean its a pyramid-scheme.