There was a time when most people lived in small villages and everybody knew about everybody else. It was not a question of choice, you just happened to be known by all your peers and there was always someone to watch what you were up to. Then came big cities, individualism, privacy and other considerations that our ancestors didn't really have.
The world is changing and we are all adapting to it. I'm not going to make a value judgements about how good or how bad the new rules established by the Internet are. What really matters is how well prepared we are to live in a super-connected world and the first thing to do is to know what is this privacy debate about.
This is a rather common question and shows how the software market today is actually quite weird. Before starting, remember that “free” in “Free Software” is about freedom and not about price. People do make money with FOSS. You will see how the development and sale of FOSS is much more intuitive than of proprietary software.
One of the most interesting things about the Free Software world is the psychological stories at play and the human tragedy that unfolds before your eyes as you discover it.
The short answer is: Linux is the kernel of a free operating system that suits as a replacement for Windows or Mac OS. Both Windows and Mac OS are proprietary software, they are available for sale and the user cannot modify how these operating systems work. The Linux kernel and the GNU applications that run on this alternative operating system are (usually) free of charge and free to be modified by the user or any community of developers. It is built by the users, for the users.