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Gratis is a shorthanded way of saying free-as-in-beer. Both are way to get around the double meaning of the English word Free. A piece of software that is gratis may or may not be libre, a piece of software that is libre is almost alway gratis, at least in some form.

A piece of software is considered gratis if it is free-of-charge to the home user. The terms of its licensing may or may not allow for that user to give it to his friends. It may or may not be okay for businesses to use it. It may only be free for a limited time. There might be a hidden quid pro quo behind the "free of charge".

Free (libre) and Open Source software tends to be gratis, but there are some exceptions. As for why libre software can get away with being gratis see: Why do programmers write Free Software?

Forms of gratis software include:

Gratis sofware is not to be confused with warez which is software that is distributed illegally.