The freemium model is a business strategy in which a product or service is offered for free with basic functionalities, while advanced or premium options require payment. It is common in SaaS companies and apps like Spotify, Dropbox, and Zoom. The key to the success of the freemium model is balancing the number of free features to engage users without reducing the incentives for them to pay for the premium version. It is an effective strategy for acquiring users and generating recurring revenue through upgrades.