The Free Form deformation allows you to deform drawings by creating points anywhere, either on their contour or inside their surface, and moving them around freely. It works a bit like laying down a piece of cloth with a pattern on a surface, then pulling on parts of this cloth to warp its shape and its pattern.
The Free Form deformation's main purpose is to deform textured shapes and complex drawings. Contrary to the Envelope deformation, which merely bends the contours of a drawing without deforming the texture inside it, the Free Form deformation stretches and squashes all the artwork between its control points. Moreover, since the Free Form deformation allows you to create points anywhere on a drawing, including inside its contour, you can actually control precisely how the texture is deformed.