When you hear this term, don't think development methodology, or price, think liberty. That's because the first thing people usually associate with free is its price. It's not going to cost me anything. That may or may not be true, but it has nothing to do with what makes free software free. Users are free to examine the source code to see how it works.
Users are free to distribute the program to others.
Users are free to improve the program. If a license provides all those freedoms, the FSF considers the software covered by that license to be free software. The GPL is not the only license which meets these criteria, there are many others that do as well. Please note that the second and the fourth items require access to the source code. This means that free software must also be open source software.