These two terms have been used around so much in the last five years, that they have become almost synonymous. Even worse, most people think that both are essentially the same thing, with different monikers.
Compared to “Open Source Software”, “Free Software” was coined a long time back in 1984, by Richard Stallman, who is associated with the Free Software Foundation. “OpenSource Software” is the result of Open Source Initiative, an ex-fraction of Free Software Foundation, who felt that “Open Source” explains the software in a much better way and has the power to convince manufacturers to release their software as Open Source. The termed was coined by Eric Raymond.
The biggest difference, it seems, is the way they treat “Proprietary Softwares”. Though “Proprietary Softwares” is the common enemy, Free Software Foundation considers it as a barrier to freedom, while Open Source Initiative finds it under-tested and incomplete.
Thus, open-source softwares give you the chance to improve on the source code, to experiment on the software, to enhance its features or efficiency. That is not possible with Free Softwares. On the other hand, many people complain, that some of the Open-source softwares are free to use, many of their features are only open to paid users.
Richard Stallman, in this article, offers an in-depth analyses in the difference between these two kinds of softwares, and even makes it’s stands clear, on why they don’t want to be clubbed with the recent surge in the “Open-Source” hype.