It means, in a nutshell, that Canada, the US and Mexico can trade goods at reduced costs/tariffs. For example, if I'm usually allowed to buy your movie tickets, but need to pay you $5 each time, NAFTA means I can buy them off you with no additional cost.

It's controversial because free trade, while great for businesses looking to outsource jobs for cheap and import goods at little cost (and republicans), free trade does nothing to keep jobs in a country. Since we're in a recession, people are looking for jobs. It does not help one bit that these jobs are probably being done in Canada or Mexico, and the manufactured goods being shipped in.

The opposite is protectionism, where everything is made and produced in one's own country, and international trade carries high levies and tariffs.

edits: sorry guys, i'm canadian :(