Exact meaning of Free Bake In the Blender Manual "Free Bake" is defined as 


  Mark the baked cache as temporary. The data will still exist, but will
  be removed with the next object modification and frame change. This
  button is only available when the physics system has been baked.


What is exactly meant with Object Modification and Frame Change ?
It basically means your bake has been cleared, but will remain visible until you change a parameter of the simulation and then change the frame and it will clear away the cached bake data.

For example, if you have baked a cloth simulation, and you free the bake, you've set it up to be cleared.  Once you change a parameter like the cloth stiffness, and then change the frame, all the baked data is then cleared from the cache.  However, if you've chosen to bake to disk, the bake information is still stored on the hard drive and can be relinked.