The reason the majority of "free" ebooks are free is because they are out of copyright, therefore they are are "in the public domain" and classified as " pub-dom" publications. This means no payments to authors or their estates are needed to provide them.
Works become pub-dom after varying periods of time, for example, in the US & the UK, copyright lasts from the death of the author plus 70 years.
So, not quite prehistoric, but sometimes a bit historic !
The exceptions are works that the authors, ot their estates, have waived copyright, or they or their publishers give them away free, and new authors do so, sometimes as a means of introducing them to a new/wider audience - or, rarely, don't believe in copyright !
But, there again, some countries have different copyright laws, with differing qualifying periods.
There are sites that have free books, but unless they're from a reputable source, they may well be illegal, so take care.
One trusted source is the MobileRead Forums with good tips and sources, with a section for special offers, "freebies", or reissue etc... or re-formatted works, and sometimes publishers offer selections by a particular author.
The other alternatives often have very low priced books, for example the Sony store has a selection at .20p. I don't think they do any "modern" freebies, but worth checking.
Can be a bit of a minefield actually - but authors have to live, and need some sort of protection for the work they produce, just as inventors, for example, have Patent laws, to prevent use of their work without paying royalties.