TL;DR
Free sugars are all instances were sugar can be avoided and is not essential. It is encouraged to cut down the free sugars intake because sugar has many negative health effects:
Sugar
- increases the risk of obesity
- is linked to diabetes
- is linked to fatal cardiovascular disease
- encourages caries
- is linked to the Alzheimer’s disease
- is linked to ADHD
There is a wealth of evidence from many different types of investigation, including human studies, animal experiments and experimental studies in vivo and in vitro to show the role of dietary sugars in the etiology of dental caries (21). Collectively, data from these studies provide an overall picture of the cariogenic potential of carbohydrates. Sugars are undoubtedly the most important dietary factor in the development of dental caries. Here, the term ‘‘sugars’’ refers to all monosaccharides and disaccharides, while the term ‘‘sugar’’ refers only to sucrose. The term ‘‘free sugars’’ refers to all monosaccharides and disaccharides added to foods by the manufacturer, cook or consumer, plus sugars naturally present in honey, fruit juices and syrups. The term ‘‘fermentable carbohydrate’’ refers to free sugars, glucose polymers, oligosaccharides and highly refined starches; it excludes non-starch polysaccharides and raw starches.
Source: Joint WHO/FAO Expert Consultation, 2003, "WHO Technical Report Series 916 Diet, Nutrition, and the Prevention of Chronic Diseases", Geneva. 2003, p.109, Emphasis Mine
Semantically, the main difference is that free sugars are refined, and non-free sugars are unrefined. This is not really a chemical difference in the molecule (refined glucose is still glucose), but rather in the process of manufacturing products and foods.
The medical effects of free sugar are the same as of non-free sugar - glucose is glucose no matter what fancy name you give it and where you put it.
But free sugar is mostly a food additive and not essential: Carbohydrates and starches are unavoidable, but adding household sugar or honey to foods as additives is unnecessary:
Free sugars* contribute to the overall energy density of diets and higher intakes of free sugars threaten the nutrient quality of the diet by providing significant energy without specific nutrients, leading to unhealthy weight gain and increased risk of obesity and various NCDs, particularly dental caries which is the most prevalent NCD globally.
Source: WHO.gov. Reducing free sugars intake in adults to reduce the risk of noncommunicable diseases
Other negative health effects of free sugar are summarised here:
Free sugars contribute to the overall energy density of diets, and may
promote a positive energy balance (5-7). Sustaining energy balance is
critical to maintaining healthy body weight and ensuring optimal
nutrient intake (8). There is increasing concern that intake of free
sugars – particularly in the form of sugar-sweetened beverages –
increases overall energy intake and may reduce the intake of foods
containing more nutritionally adequate calories, leading to an
unhealthy diet, weight gain and increased risk of NCDs (9-13). Another
concern is the association between intake of free sugars and dental
caries (3, 4, 14-16). Dental diseases are the most prevalent NCDs
globally (17, 18) and, although great improvements in prevention and
treatment of dental diseases have occurred in the past decades,
problems still persist, causing pain, anxiety, functional limitation
(including poor school attendance and performance in children) and
social handicap through tooth loss. The treatment of dental diseases
is expensive, consuming 5–10% of health-care budgets in industrialized
countries, and would exceed the entire financial resources available
for the health care of children in most lower income countries (17,
19).
Source: WHO. Sugars intake for adults and children. p.1, Emphasis Mine
Furthermore, eating too much added sugar increases the risk of dying with heart disease (Harvard Health Blog) and is correlated to ADHD development.
In the past decade, we have become increasingly aware of strong associations between overweight/obesity and symptoms of attention-deficit/hyperactivity disorder (ADHD) in children, adolescents, and adults.
Source: Davis, Caroline: Attention-deficit/Hyperactivity Disorder: Associations with Overeating and Obesity. 2010
Last but not least, links between sugar intake and the Alzheimer’s Disease have been found.
The only good news is that the current consensus regarding sugar addiction is that sugar is not addictive for humans:
We find little evidence to support sugar addiction in humans, and findings from the animal literature suggest that addiction-like behaviours, such as bingeing, occur only in the context of intermittent access to sugar. These behaviours likely arise from intermittent access to sweet tasting or highly palatable foods, not the neurochemical effects of sugar.
Source: Sugar addiction: the state of the science