"Free Roam" is one of many ways to play Red Dead Redemption with other people. As the video below explains, during Free Roam, you pick an avatar and explore the Red Dead world in a group of up to 16 people. You are all then free to start a posse and team up with others, start fights, go hunting, or do anything else you would normally do in the game. You and the other players in your group all stay in Free Roam while your group leader sets up a traditional/structured multiplayer match, rather than the traditional chore of making everyone wait in a lobby menu until the match is ready to start. This concept of always being in the game's world was applied to my last game Midnight Club: Los Angeles as well, but RDR2 pushes the concept much further.
But enough of my yapping. This video shows it better than I can tell:
Click here for full "Multiplayer Free Mode" write-ups on the Rockstar website.
And keep an eye out for the new Red Dead Redemption Dueling Facebook Game on Monday.