Free Cash Flow is calculated from the Statement of Cash Flows as Cash From Operations minus Capital Expenditures. This is measured on a 3 year historical basis.
Free Cash Flow is a measure of the amount of free cash available to a business after is has paid its operating costs and after the effect of Capital Expenditures.
This is the cash that will be free every year to provide a cash return to Shareholders. As such it is vital that a company is generating Free Cash Flow and companies that are able to do so on a regular basis are considered to be of a high quality.