Freeform is basically roleplaying without the rollplaying. It can operate with or without a GM, but if your GM is a dick then rocks fall, everyone dies. Freeform roleplay might have rules, but they're probably really simple and vague, like FUDGE. There probably won't be any classes, levels, experience points, or any of the other crunchy stuff that powergamers like.
Freeform roleplaying does offer some advantages. Without dice or stats, roleplaying is possible in scenarios or mediums where such things are impractical. Freeform games are most often associated with internet roleplaying, as they can be done over pretty much any communications method, from play-by-post forum games to IRC or other text chats, to audio chats (steam, Teamspeak, Ventrilo), to video (Skype, Hangouts, Facetime). Occasionally freeform will be used IRL as well, especially where the advantages have some use such as during a car trip. It should be noted that there are plenty of options available for dice, character sheets, and minis when roleplaying online, so Freeform is not by any means your only option.
If your GM wants to use this style in a typical gaming setting it is because he is likely too lazy to do any real prep work.
Freeform RPing is a popular pastime of small children.