A free form is a °form that can occur on its own as a complete utterance.
Instead of "on its own", one can also say "in isolation". Note that a form is the same as an expression, so one may also say "free expression". Longer forms (such as nominal phrases and clauses) are usually called "expressions", not "forms", but these terms refer to the same concept.
The term (and the definition) comes from Bloomfield (1926; 1922) (see also this blogpost: https://dlc.hypotheses.org/4485). The importance of the distinction between free forms and bound forms was recently highlighted by Haspelmath (2021).