Since you implied you're comfortable on the computer side of the house... it's talking about the scope of a variable. "$\lambda x.$" introduces a new scope which lasts for the length of the lambda expression, and $x$ is a local variable in that scope.
A free variable is one not local to the expression. e.g. in $\lambda x. xy$, $y$ is free.
Some syntaxes for lambda calculus allow a local variable to shadow a global one, just as in common programming languages. In $(\lambda x.x)x$, the lambda expression introduces a local variable $x$ which shadows the 'global' variable by the same name. I like to use colors when dealing with expressions like this, to help distinguish them: the expression is colored $(\lambda {\color{red}x}.{\color{red} x})\color{green}{x}$. The red and green $x$'s are different variables.
Note that this isn't lambda-calculus specific. Quantifiers ($\forall x:$, $\exists x:$) do the same thing. So does integral notation: $\int \ldots \, dx$ (Leibniz notation for derivatives too... sort of...). Such a thing is also usually implied when defining functions pointwise, as in
$$f(x) := x^2$$
As usually meant, $x$ is a variable local to the expression. And $f$ is a global variable! (or maybe a global constant, depending on the context and how one likes to set up the low-level details of syntax)
Do keep in mind that people aren't always consistent about distinguishing between syntactic details. Particularly on topics like whether $x^2$ is an expression that denotes a real number (the square of $x$) or an expression denoting a function in one indeterminate variable (the function that squares its input) to which $x$ is bound.