Eric Steven Raymond (now also known as ESR) wrote an essay titled “The Cathedral and the Bazaar”, and presented it to the Linux Kongress at 21 May 1997. This contrasted the Bazaar way of managing a software project to the old “Cathedral” way, that was used by almost all non-free projects and (until that point at least) by most free ones.
“Bazaar” projects are characterised by frequent and incremental release schedules, treating the users as co-developers, and generally getting a lot of peer review, ideas, input and cooperation. Despite a common misconception, the core group of the project contributors still usually remains relatively small except for some of the larger projects.
The article is considered one of the seminal works on free software, and was followed by other works in what is collectively known as the “Cathedral and the Bazaar” (or CatB for short) series. It has made Eric Raymond a famous person, at least among the community of free software hackers.
In February 3, 1998, in Palo Alto California, a brainstorming session which Raymond attended, coined the term “open source” as an alternative for “free software”. Their incentive was that when talking to a businessman, either free software will be understood as gratis software, or it will be associated with the relatively anti-Capitalistic views held by Richard Stallman (who claims non-free software is immoral). They decided that the term “open source” would be a better candidate for acceptance in the corporate world.
Consult the opensource.org history document for further coverage of the history of the term.
During the following week, Eric Raymond, and Bruce Perens launched the opensource.org web-site, and formed the Open source definition. This was based on the Debian Free Software Guidelines.
The term “open source” caught on. Very soon, Richard Stallman decided to reject it on the premise that the freedom of software is more important than the “openness” of its code. While he does not oppose the openness of the code, and acknowledges the fact that free software is open source as well, its freedom remained more important. For more about this stance, read the document “Free Software for Freedom” on the GNU web-site.
While some people have continuously stuck to the term “free software” and a few others converted to using “open source” entirely, most knowledgeable people don’t completely reject either term, and use each one whenever they see fit. Nevertheless, the term “open source” is more commonly used by both open source developers and even more so by non open source developers. See Eric Raymond’s “Terminology Wars” for more details.