A free hacking zone exists to allow hackers (or more correctly crackers) to exercise their hacking skills while not breaking the law.
Some sites allow totally free access to do as you wish, while others have a structured set of tasks to overcome on your path to root.
They may be considered good or bad. There are many who want to try their hand at hacking, but are unwilling to break the law. There are those, however, who can use them as a method of learning skills to later use illegally. Some security companies are rumoured to actually pick their staff from the high-flyers on the sites.
A well-known example, at the time of writing, is run by the Korean company HackersLab.