According to CSO Online for July 2005:

Items collected by TSA will typically get donated to the states were they were confiscated.

These states and sometimes TSA is selling the "stuff" on the Internet (mostly eBay?).

What you can get: "pocket knives, files, nail clippers, lighters, and a purple sombrero."

Very interesting …. When I go on travel I have a self-addressed envelope with two first class stamps on it to mail something back that has been "captured."  It has saved me twice since 9-11 from having to re-purchase my Leatherman Juice Pro.