Most, if not all, software packages contain some form of license agreement. This agreement defines what you, as the end user, are allowed or not allowed to do with the software. For example, a license agreement may state that you are allowed to install only one copy of the software to one computer at any given time, and that redistribution is prohibited. In this case, you would have to buy a copy of the software for each computer you want to install it onto, and you are not able to share the installation CD with your friends.
Open source software differers from other software because it has a less restrictive license agreement: Instead of using a restrictive license that prevents you from modifying the program or sharing it with friends for example, sharing and modifying open source software is encouraged. Anyone who wishes to do so may distribute, modify or even create derivative works based on that source code!
There are several immediate advantages to using open source software:
For more information, see the Open Source Initiative's definition of open source software.