In general terms free software is one phrase for describing software that comes with certain freedoms, the free doesn't speak about the price, it speaks about your freedoms to use the software. A common suggestion is that you think "free speech" instead of "free beer".
See http://www.fsf.org/philosophy/free-sw.html for the Free Software Foundation's definition of "free software".
A related term is OpenSource, you can find out more about the idea of OpenSource at http://www.opensource.org/. You might also want to note that the FSF don't consider OpenSource and Free Software to be the same thing, see http://www.fsf.org/philosophy/free-software-for-freedom.html for more details.