I can be a bit confusing. Per your example, in your case, you get $5.00 from every "secondary" referral (someone who signs up using the promo of the person who signed up using your promo code)
Just like above - the "new" user saves up to $97.00 off their first year's hosting, and the user offering the promo code has a potential for a $5.00 secondary referral.
For some who are offering a $97.00 promo code, the reasoning is that "the possibility of getting $5.00 'every now and then' is better than getting nothing now" - thinking that since there are so many $97 (max discount) promo codes out there, offering less might not get their promo codes used at all, as new users are likely to use one of the "max" codes.
Interestingly enough, this thinking is not always correct, as there are some new users who will take a smaller discount, and pass some reward to the user that referred them, because they want to share, or "thank" the person offering the "lesser discount" for help they have received, or for some other reason (for example, using a promo code with a smaller discount because the user offering the promo code is donating the proceeds of their promo code to a charity, allows a user to save some money and help a charity at the same time!).
For many (possibly most?) who offer the $97 (max) discount codes, the chance of a future $5.00 reward doesn't really have anything to do with their decision - they just want to give the maximum discount to the new users because they are sharing individuals who are more interested in being able to "pass on" savings to others than they are in making money from the use of Promo Codes.