Ok.
First, linux isn't an OS, it's a kernel, which means only the heart of an OS that interacts with the hardware. And it's based on Minix, which objective's was to reproduce UNIX, that was developed by AT&T about 30 years ago.
Second, linux (as a kernel) isn't freeware. It's open source, released under the terms of General Public License (GPL). It's free (in the money sense) and free (liberty), which means you can do whatever you want with the source code, as long as changes are released to the public.
The great thing about linux is the modularity. Everything is as independant as it can be. You don't need to run a GUI, don't install the graphical server and use the console only.
There are more than one graphical server (all based on the same protocol, X) the most known one being XFree. Once you have the server running, you can run one of the dozens of window manger to actually control the windows, or one of the two desktop environment that both somehow look like most known GUIs like Windows or MacOS.
The filesystems (because again there is lots of choices) are UNIX filesystems. Which means that each file is owned by a user and a group, and you can modify each file's permission for the group, the user, and everyone else. Properties include read, write and execute. And as a user, you don't have access to the root filesystem (like important configuration files). So your important files are protected as long as you don't use program as root (admin-mode).
As for why it's better than windows, well it all depends on what you use your computer for. Installing software that doesn't come bundled with your distribution of choice (Distributions are the kernel with the graphic server, and window manager, and various programs you'll need) can be hard and long. But some distributions make it easy to install new software. But on the other hand it's almost impossible to completely kill the OS. Forget the blue screens of death. As everything is independant, a program can't bring down the system if it crashes. And if you don't need high end professional apps, and just do office stuff, internet browsing, and listen to music, it's perfect for you as you're protected against all the virus from the windows world (linux can't run windows programs, so it can't run the viruses either).
And finally, the distribution choice is also quite large, so you might want to look at some before actually downloading one. The most known ones are RedHat (now a community project called fedora), Suse (only the ftp version is free), Mandrake (the best for people who don't know anything about linux if you ask me). But if you want to really test linux, get knoppix. It boots from a cd and lets you the chance to use almost anything linux without installing anything on your hard drive. And as I said there are dozens of other linux distro, but you probably don't want to use an underground or geeky distro as your first contact with linux.
So... Uhm, if there's anything you still don't understand, just ask.
