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Open source is a philosophy which suggests that the source code behind something should be freely available to the public. The principle originated in the software industry in the late 1990s, with several releases of open source software and operating systems, and it has since diffused into other communities as well. There are a number of strong arguments for releasing something in an open format, whether it be a recording, a software tool, or an entire operating system.
The main advantage to releasing something in this way is that it allows end users to directly interact with the source, potentially modifying it to suit their wishes. This encourages constant development and innovation, while also creating a community of shared information. Many companies which produce open source products rely on the innovations of users to expand features and to identify and fix potential weak points, and these companies actively encourage modification of their products.
There are varying levels of open source. In some cases, for example, a release may have certain restrictions, in which case some people prefer the term “shared source,” or “shared commons.” For example, someone may release a recording in open source format, but ask people not to profit from their retooling of the album. Many advocates of the open source philosophy prefer truly free items, allowing people to do whatever they want with the source code and the end product.
Some people mistakenly believe that all open source material is also automatically free. This is not, in fact, the case. Several companies manufacture open products which require people to pay for them, with the fees supporting development of new products and additional features. It is also common to see shared source licenses on things which people pay for. Apple Computer, for example, releases some of its technology under open licenses.
This philosophy has its critics, especially in the intellectual property community. Most of these critics argue that for development and distribution to really work, a strong central organizer is needed, and it is not unreasonable for major developers to expect compensations for their work on projects. When material is truly open source, however, it is challenging to figure out how to structure such compensations, and this often leads to tangled issues with shared licenses and restrictions which some people find chafing.
No, open source doesn't always mean free. Apple's OS X, for example, is based on FreeBSD -- an operating system that is derived from Unix and, much like Linux, is available for free. OS X, although based on open source code, is in no way free.
Regardless, those who consider open source software as being somehow inferior need to take a second look at what open source programs are available. And, yes, many of them are free. Linux is open source as are fantastic office suites such as OpenOffice.
The amount of quality software that is both open source and free may surprise someone who isn't familiar with how that concept has developed over the years.