Accompanying the release of "Meet the Medic", Valve has decided to make Team Fortress 2 completely free for all time. The ten dollars that the game cost previously was a pretty great deal already, but Valve feels that they can support the game and future development costs based solely on the microtransactions resulting from hats, weapons, crate keys and whatnot.
In an interview with Develop, Valve's Robin Walker tells us that drops of in-game loot and profit sharing for user generated content will continue just as it has until now, and the official TF2 blog has a FAQ up detailing the specifics between free accounts, and premium accounts. If you download the game for free, you'll officially have a "Free" account up until the point in which you purchase something for the game, be it a hat or whatever, after which your account attain "Premium" status.
Premium accounts have 300 backpack slots (expandable to 1000), can have standard, rare, and cosmetic items, can craft every available item, can trade items with any other player, and can both give and receive gifts. Free accounts can do most of this stuff as well, but it's all limited to one degree or another.