Difference between free software and open source software?

There is a difference between free software and open source software. Specifically, all free software is also open source software -- because it fits within the Open Source Initiative (OSI) definition of open source (often called the OSD for short).

However, not all open source software fits the definition of free software as defined by the GNU Project or the Debian Project. What's the difference? Primarily, it's one of philosophy. The free software philosophy is centered on the idea that, in the words of the GNU Project, free software "is a matter of liberty, not price."

Open source, on the other hand, is primarily centered around the development model. The idea is that the open source model -- distributed development, a transparent development process, and peer review of code -- is better than the proprietary development model. Thus, open source licenses may restrict users in ways that free software licenses may not.

Not all software that runs on Linux is free in either sense of the word. Lots of companies make proprietary software for Linux, and charge a pretty penny for it, too. For example, Oracle's products run on Linux, and they don't give them away -- they have turned quite a profit running the Oracle database and other products on top of Linux.

While the GPL and other licenses require that derivative works carry the same license terms, they don't require that non-derivative products carry the same licensing terms, so companies can and do sell software that runs on Linux without breaking any rules or violating the licenses.

In fact, a few companies actually sell Linux and support it, and do pretty well at that. Red Hat's distribution, Red Hat Enterprise Linux, is comprised of free and open source software (FOSS) and they've been turning a profit for some time doing so. Instead of making its money on the sale of licenses, Red Hat makes its revenue on selling support for the distribution because lots of companies are willing to pay to have someone to turn to if and when they have problems or need new features.