Messages longer than 3 texts in length get sent as mms (picture messages) rather than sms (texts), thereby costing more than texts, or being outside your contract (if you have pre-paid texts).
If you leave this setting on 'Free', this conversion to an mms will happen with no warning. If you leave this setting on 'Warning', you get a brief flash of a warning message on your screen when you type a message that is longer than 3 texts in length. If you have it on 'Restricted', you shouldn't be able to type a longer message in one go, but I have to say that my Galaxy Ace is set on Restricted and I have still managed to inadvertently send a long message as an mms.