I like the term precisely because it causes that double take moment that catches people's attention. It's not actually an oxymoron when you more carefully examine it.

Socialism just dictates that the workers own the product of their work. A free market socialist economy would be one in which employees owned and democratically controlled businesses and in which it was illegal to sell equity in a business (the stock market simply wouldn't exist).

It could be structured as "one employee one vote" or it could be structured so you earned equity and vote over time (perhaps in proportion to your salary). Capital financing in this economy would happen through bank loans (which wouldn't confer any kind of control), crowd sourcing, and through public means.

This economy isn't centrally planned. The government doesn't own the businesses, the employees do. The government doesn't dictate how they operate, the employees do, democratically. You can still start your own business, and when you're the only employee, you call the shots -- it's only when you hire your first employee that you have to start sharing decision making in some way.

It's free market, because there's still a free market for goods and services.
Businesses still compete in a competitive market.

It's a really, really interesting idea. When you dig into it, you find all kinds of fascinating and promising potential side effects of a society and economy shaped this way.

For just one example, it would incentivize innovation and the finding of efficiencies even more powerfully than a capitalistic free market -- because the worker making the innovation would ultimately own and control the business benefiting and so would directly benefit. If a worker came up with a innovation that increased efficiency, that worker would then get a voice in whether the increased efficiency was turned into more wages or more free time. That's a huge incentive. Right now, there's no guarantee that any particular employee will benefit directly from their innovations, so many aren't incentivized to really try very hard at their jobs.

There are many other possible effects of a society structured like this. Among them:
- People who get more practice at operating democratically and would thus get better at it.
- It might discourage growth after a point - because large democracies get unwieldy fast.
- It would naturally resist the concentration of wealth and power because the system would more evenly spread the profits of business.
- It would encourage businesses to stay in and be more respectful of the communities they operate in because the people who are calling the shots also live in those communities.
- Similarly there might be less of a need for regulation around externalities (like the environment) because the folks calling the shots are the ones living in the communities in which the businesses operate and are directly effected by the externalities.

But it's also an idea that's really hard for a lot of people in our current economy and society to wrap their heads around. The idea that "Free Market Capitalism" and "Totalitarian, Centrally Planned Communism" are the only two systems available is really heavily ingrained in most people. And the concept of a business that operates democratically is totally alien to most. We're just so used to hierarchical, authoritarian businesses that it's hard for many people to even imagine it could be another way.