The fact that we believe there's always a catch shows that the word has changed. Or at least our feeling about it has.
There is, however, a way that free still works - and works very well.
Free works when it is completely unexpected. When a customer orders 8 copies of an author's book and 12 show up (thanks, Seth!), free works. When you forget to order your drink in the drive thru and they give you the drink on the house, free works.
10% off is nice, but it doesn't work like it used to - and neither does 40%. If you want to build a fan for life, give them something for free when they are fully expecting a transaction - when there is no way it should be free.
Then, my friends, free works!