"I know that Linux is an alternative to the Microsoft Windows operating system, but when and where did it originate, and why is it free?"
A Really Brief History of Unix
Sometime in the mid 1960s, a bunch of geeks at AT&T's Bell Labs decided it would be fun to create a new operating system called Multics. (This was no small task, because computers at the time were about the size of a football field and two stories high.) Multics fizzled in 1969 when Bell cut the cord, but some of the geeks continued work on what became known as UNIX; and it became wildly popular inside AT&T.
Since AT&T was not allowed to sell computer software at the time, it gave away UNIX (complete with source code) to any educational institution that wanted it. AT&T produced new versions of UNIX called System III and System V in the early 1980s, but all the while, geeks at the University of California at Berkeley and other places were busy hacking away on their own versions of Unix based on the AT&T code.
Some cross-pollination did occur, but there are still significant differences between the Berkeley (commonly called BSD Unix) and AT&T flavors. In the early 1990s, AT&T sold UNIX to Novell, which was bought by Digital Equipment Corporation, which sold it to SCO (Santa Cruz Operation), which markets it as UNIXWare.
So, Ummm... What About Linux?
Today, there are lots of Unix variants sold or given away by many different companies and universities. While these various flavors can make it difficult to write portable software, efforts to standardize Unix (two of the more notable ones being POSIX and COSE) offer hope for greater compatibility in the future.
In the early 90s, a geek named Linus Torvalds at the University of Helsinki in Finland thought it would be fun to write a PC-based Unix kernel from scratch, without using any of the original AT&T UNIX code. This kernel, with the addition of open source unix utility programs from the GNU Project, became known as Linux.
Because of that (and because the author is a nice guy), Linux is free. You can obtain the source code, modify, sell or give away the software so long as you provide full source code and don't impose any restrictions on what others do with it.
Source Ask Bob Rankin.