For a long time open source software held the earlier label of "free software." The free software movement was formally established by Richard Stallman in 1983 through the GNU Project. The free software movement organized itself around the idea of user freedoms: freedom to see the source code, to modify it, to redistribute it—to make it available and to work for the user in whatever way the user needed it to work.
Free software exists as a counterpart to proprietary or "closed source" software. Closed source software is highly guarded. Only the owners of the source code have the legal right to access that code. Closed source code cannot be legally altered or copied, and the user pays only to use the software as it is intended—they cannot modify it for new uses nor share it with their communities.
The name "free software," however, has caused a lot of confusion. Free software does not necessarily mean free to own, just free to use how you might want to use it. "Free as in freedom, not as in beer" the community has tried to explain. Christine Peterson, who coined the term "open source," tried to address this problem by replacing ‘free software’ with ‘open source’: "The problem with the main earlier label, ‘free software,’ was not its political connotations, but that—to newcomers—its seeming focus on price is distracting. A term was needed that focuses on the key issue of source code and that does not immediately confuse those new to the concept."
Peterson proposed the idea of replacing "free software" with the term "open source" to a working group that was dedicated, in part, to shepherding open source software practices into the broader marketplace. This group wanted the world to know that software was better when it was shared—when it was collaborative, open, and modifiable. That it could be put to new and better uses, was more flexible, cheaper, and could have better longevity without vendor lock-in.
@shahednasserr Yo, what do you mean by "free"? Do you mean I can use images from these websites in open source projects?— Abanoub Asaad (@SteamPoweredDM) Sep 04, 2021
Eric Raymond was one of the members of this working group, and in 1997 he published some of these same arguments in his wildly influential essay "The Cathedral and the Bazaar". In 1998, partly in response to that essay, Netscape Communications Corporation open sourced their Mozilla project, releasing the source code as free software. In its open source form, that code later became the foundation for Mozilla Firefox and Thunderbird.
Netscape’s endorsement of open source software placed added pressure on the community to think about how to emphasize the practical business aspects of the free software movement. And so, the split between open source and free software was cemented: "open source" would serve as the term championing the methodological, production, and business aspects of free software. "Free software" would remain as a label for the conversations that emphasized the philosophical aspects of these same issues as they were anchored in the concept of user freedoms.
By early 1998 the Open Source Initiative (OSI) was founded, formalizing the term open source and establishing a common, industry-wide definition. Though the open source movement was still met with wariness and corporate suspicion from the late 1990s into the early 2000s, it has steadily moved from the margins of software production to become the industry standard that it is today.