From their website:
FreeCache works by moving content “hot spots” on the web closer to users. This provides several advantages to various parties involved: Users get faster downloads, content providers pay less for Internet-bound traffic, and ISPs pay less for Internet-originating traffic.
An example:
Say an up-and-coming rock band, the RockLobsters, has a website that has a large file, say http://www.rocklobsters.com/videos/my-new-rock-video.mpg that is 5MB-1GB in size. If it gets popular, they will lose their guitars and homes to their ISP because their bandwidth bill will shoot up.