FLAC is a free codec in the fullest sense. This page explicitly states all that you may do with the format and software.
The FLAC and Ogg FLAC formats themselves, and their specifications, are fully open to the public to be used for any purpose (the FLAC project reserves the right to set the FLAC specification and certify compliance). They are free for commercial or noncommercial use. That means that commercial developers may independently write FLAC or Ogg FLAC software which is compatible with the specifications for no charge and without restrictions of any kind. There are no licensing fees of any kind for use of the formats or their specifications, or for distributing, selling, or streaming media in the FLAC or Ogg FLAC formats.
The FLAC project also makes available software that implements the formats, which is distributed according to Open Source licenses as follows:
The reference implementation libraries are licensed under Xiph's variant of the BSD License, a.k.a. the Xiph License. This is a trivial variation of the popular BSD License where the Xiph.org Foundation is substituted for the University of California, Berkeley. In simple terms, these libraries may be used by any application, Open or proprietary, linked or incorporated in whole, so long as acknowledgement is made to Xiph.org Foundation when using the source code in whole or in derived works. The Xiph License is free enough that the libraries have been used in commercial products to implement FLAC, including in the firmware of hardware devices where other Open Source licenses can be problematic. In the source code these libraries are called libFLAC, libFLAC++, libOggFLAC, and libOggFLAC++.
The rest of the software that the FLAC project provides is licensed under the GNU General Public License (GPL). This software includes various utilities for converting files to and from FLAC format, plugins for audio players, et cetera. In general, the GPL allows redistribution as long as derived works are also made available in source code form according to compatible terms.
Neither the FLAC nor Ogg FLAC formats nor any of the implemented encoding/decoding methods are covered by any known patent.
FLAC is one of a family of codecs of the Xiph.org Foundation, all created according to the same free ideals. For some other codecs' descriptions of the Xiph License see the Speex and Vorbis license pages.
If you would like to redistribute parts or all of FLAC under different terms, contact Josh Coalson.