There are two camps when it comes to software development.
Proprietary software.
Software where a company owns the rights of the software. The company hires the developers to develop the software. As a company they take on all the development risks and support for the software. The software is licensed under a proprietary agreement restricting the modification and distribution of the software.
Open Source and Free Software.
Software that uses a community of developers and users who are interested in developing the software. The source code is open and free for anyone and everyone to modify and distribute with the only provision being that the source code remains in the public domain. The drive behind this style of software development is in the term “Free”. The freedom for developers to share code and ideas without the risk of anyone claiming proprietary ownership for their contribution.
As for free as in cost: Under most public licenses the source code cannot be charged for however compiling the code into an installation package and the supply of support can be. Saying that for many projects there is usually a packaged version of the software ready to use free of charge. This comes back to the simple fact that projects are dependent on community involvement that includes users as well as developers; users that report bugs and write documentation, translate manuals to other languages. Most projects still have costs to keep their project running and do depend on donations and support of their community.
As the source code is made public, rather than restricted to the employers of a software company the code is open to a vast number of developers and users to analyze and contribute either in bug feedback, refining or adding new functions. A model that returns a clean code that is molded to real world requirements. And as the ownership remains in the public domain contributors are happy to contribute as in return for their efforts they get the benefit from others. As an example OpenCart http://www.opencart.com has over 4000 registered users on its community forum. Some of these members are programmers who contribute code back to the project as they add new functionality and fix bugs. Others are users, using the application in real world situations and returning back to the community problems, errors, suggestions and documentation.
For more on Open Source visit http://www.opensource.org or for Free Software visit http://www.gnu.org/philosophy/free-sw.html