Instead of duplicating the information, you can find information about all the different contract types here:

http://wiki.eveonline.com/wiki/Contracts#Contract_types

Free form contract is, well, free, you can put anything you want into it. One legitimate example for free-form contract could be hiring a Mercenary corp to make someones life very miserable.

Also, beacuse of the freedom, most freeform contracts just end up being scams, since there is no game mechanic saying when a freeform contract has been successfully completed (all the other contract forms have this). So it's sort of a "i-give-you-my-word" contract. And yeah, you shouldn't trust anyones word in EVE :-)