There are two meanings for "freeroll" in poker:
Freeroll Tournament
A freeroll is a tournament that has no entry fee; it is free for entrants. Note that this does not necessarily mean that anyone can enter: there may be other qualifications needed. In fact, there are two types of freeroll tournaments in online poker rooms: those with a registration that is open to everyone and those with a restricted registration.
Brick-and-mortar casinos also sometimes have freerolls, but it is usually restricted to players who have won entries in other tournaments, either through sheer participation or through high finishes. Occasionally, a brick-and-mortar casino will hold a freeroll for promotional purposes, such as when the Commerce Casino held an invitational freeroll tournament for local Hollywood celebrities and poker pros.
Freerolls with Open Registration
Free tournaments are very popular in the online poker rooms as they are used to attract new players. Some tournaments are open to everyone and are held on a regular basis. For example, Pitbull Poker hosts free tournaments every hour for all of their members. Some poker rooms have special tournaments that are reserved to new or loyal players. For example, PartyPoker offers daily freeroll tournaments for new players, but in order to enter you must have signed up no more than seven days prior to the tournament. Carbon Poker has a $50 Freeroll for all new players which runs 4 times a day. New depositing players at Carbon receive 14 days entry into their $500 Freeroll which runs once a day. To reward loyal players, Carbon also has a $50,000 Freeroll that is open to all players who earn 5000 comp points during the month.
Most of the tournaments which are open to all members will have a lot of registrations. This can lead to very long tournaments, and often frustrating because it is difficult to finish in the money. In fact freeroll tournaments with many players involve a lot more luck then regular buy-in tournaments since the players have nothing to loose. The play is usually more aggressive and you will see a lot of all-ins in no limit games. Some freerollers play in as many free tournaments as they can. You will notice these players quickly as they play with no fear (and no skill) trying to raise their stack quickly with many all-ins.
Private Freerolls
The registration for these tournaments is either restricted with some password or with a list of players. Private freerolls are usually offered by affiliate sites that promote the poker room. The tournaments help to send more players to the poker room and also give the players a better experience once they have joined. Playing in free tournaments is a good way to try out a poker room before making a deposit. Since private freerolls have fewer players than those with open registration, the tournaments are easier to win and the skill level of players is usually better. In order to gain entry, you usually need to be a member of a certain site or community. Very often you will also need to meet other requirements before you can gain access to the passwords. The idea of private freerolls is to reward loyal visitors of the site, and that is why most sites do not give an easy access to their passwords.
Freeroll a Hand
A player is freerolling on a hand if they currently have an equivalent hand to the other player(s) in the hand but also have a draw which would give them a better hand. This word is generally only used if the other player(s) do not have such draws.
An example would be a hand of Hold 'em where two players have the following hands:
Player A: 
Player B: 
and the board, after the turn, has:
Both players now have an Ace-high straight, and regardless of the river card, Player B cannot improve their hand. Player A, however, is freerolling on their flush draw, since any heart on the river gives them a flush.
Player A cannot lose the hand, no matter what; the worst they can do is tie and split the pot with Player B. However, they could potentially win the entire pot if the river comes favorably.
When a player is freerolling, it is to their advantage in terms of strategy to get as much money into the pot as possible. In the worst case, they will get the money returned. In the best case, they will win that much more.