Free actions consume a very small amount of time and effort. You can perform one or more free actions while taking another action normally. However, there are reasonable limits on what you can really do for free, as decided by the GM. Free actions may only be performed during your turn, unless a specific ability states otherwise.
Some combat options are free actions meant to be combined with an attack. Often, these are feats with specific limitations defined within the feat. For example, Cleaving Finish gives you an extra melee attack, but only after you make an attack that drops a foe.
A 5-Foot Step is a special kind of free action, which allows you to move 5 feet without provoking an attack of opportunity. However, you may not use a 5-foot step in any round in which you have used a move action to move. Note that attacks which include movement, such as a Charge, count as movement that prevents a 5-foot step, unless the ability specifically states otherwise.
A character may also delay his action until later in the initiative order, as a free action. Doing so lowers the character's initiative until they declare they want to take their turn. However, a delayed action can never interrupt another creature's turn. It must be taken either before or after other creatures in the initiative order. A character who wishes to react to specific events before they happen should instead use a standard action to 'ready an action'.
Most dialogue is considered a free action during combat. This is not because talking takes no time, but because monologues, taunts and exclamations about how despicable your foe is add flavor to an encounter, and should be encouraged. GM's may even wish to grant the occasional circumstance bonus as a reward for particularly inspired or entertaining dialogue. However, GM's should require the use of the Feint (Bluff) or Demoralize (Intimidate) actions if players want to gain significant advantages from dialogue. Outside of combat, conversations take at least a few minutes or more.