In general, a free lease means that the lessor does not pay the horse's owner a fee. Instead, they simply cover all of the horse's expenses. In the lease agreement, vet visits, farrier appoinments, showing/going off property, and etc. can differ from lease to lease. Some have the lessor pay only a portion, or if the horse gets hurt from the lessor's action, they have to pay the vet bills in full.
I would expect the lessor of my horse to treat her with the same care (or perhaps even more) that I give my horse. Basically, it's like my horse is theirs except that they don't own her.