Licensing

A license is the set of restrictions on what you can do with a game.

Source code and binaries (compiled executables) may have different licenses. A source code license one restricts the use and availability of code, the binary license restrictes the use and availability of the game. To play a game one usually only needs to be concerned about the binary license. However, if the game is not available on your platform, or you have political objections to closed sourced proprietary software, the code license can also become important.

Usually, if the source code is available, the game is freeware. However, some games may license the art assets separately from the code. Thus, the code may have no cost, but the art assets may require a purchase. The "game license" is taken to be the most restrictive of these licenses.

This is not a legal definition. Many other sites go into exhaustive depths as to the nuances of these different licenses.

Source licensing:

• Closed source: The source code is not available to the public. Only pre-compiled binaries are available.
• BSD: The source code is available and you are allowed to reuse it in your code, even if your code is closed source.
• GPL: The source code is available, but if you use it in your code, you must release it as GPL.

Game licensing:

• Commercial: You have to purchase the game before you can play it. You are not allowed to share the game with friends. Many commercial games provide demos which conflates Commercial with Shareware. Often the distinction is made that Commercial has a box in a store shelf whilst Shareware is internet only. That isn't a very good distinction, however.
• Shareware: You can download and play the game without paying the original author. However, the game is limitted in some way. You can only play it for a certain length of time, or only part of the game is available, or some features are missing. To get the full game you have to purchase the full game. You are likely free to share the shareware version of the game with friends, but CD compilations are often frowned upon. It is suggested you contact the author before you redistribute in a large scale.
• Freeware: You can download and play the game without paying the original author. There is no limitted time period to play the game and the entire game is available to you. While you can freely give the game to your friends, many freeware authors frown on CD compilations. It is suggested you contact the author if you wish to redistribute in a large scale.