Who buys these paintings?

Lately, I've been reading about the sales of paintings which are in the tens of millions of dollars, with a recent Rothko ("White Center (Yellow, Pink and Lavender on Rose)") selling for $72.8 million dollars. See:

Even though I'm not a big fan of most paintings except for surrealism (Dali, Escher) and impressionism (Monet, Manet) I think still this is an insane price to pay. My question though is, who can afford it and how come this keeps happening? My guess is that it'd have to be limited to people with very high net worth. According to Forbes, there are only a few hundred (500+?) people in the world with net worth >$1 billion and most of it is on paper (i.e., Bill Gates couldn't sell all his MS stock in one day). I'm venturing that someone with a few hundred million dollars of net worth (less than $500 million say) is unlikely to spend so much on a painting, but who knows?

Or when these paintings are sold, do they have to be paid in cash? That is, can Bill Gates just exchange this for $72 million worth of MS stock?

What's wrong with this picture? Are there more billionaires in the world than we know of (and if so, how many are there)? Or are they institutional buyers?

I definitely see value however in buying stuff like this once you reach a certain level of wealth. My own preference are natural diamonds (well, my wife loves to wear them but I'm a big fan of near flawless, perfect diamonds--it's hard to get anything above two carats for this though). This should be an okay investment until they can create artificial diamonds that are as good as real ones.

--Ram