It's free because Knuth chose to make it so. He is nevertheless apparently happy that others should earn money by selling TeX-based services and products. While several valuable TeX-related tools and packages are offered subject to restrictions imposed by the GNU General Public Licence ('Copyleft'), TeX itself is not subject to Copyleft.
There are commercial versions of TeX available; for some users, it's reassuring to have paid support. What is more, some of the commercial implementations have features that are not available in free versions. (The reverse is also true: some free implementations have features not available commercially.)
This FAQ concentrates on 'free' distributions of TeX, but we do at least list the major vendors.
This question on the Web: http://www.tex.ac.uk/cgi-bin/texfaq2html?label=whyfree