Freelance is a term that is used to refer to someone who works for more than one employer and schedules their own working time. The word freelance comes from the Middle Ages, when there were basically two types of knights. You can learn more at http://www.directcreative.com/blog/freelance-definition.
Depends on the area of work. Mostly it means "I have no insurance". If you're hiring a writer or an artist, you're probably OK, but if you want somebody to take down a tree or re-roof your house, refer to my first sentence.