This may sound utterly dumb, but why is freelancing called 'freelancing? I have never understood where this name came from, could some one explain please. Thank you

I don't know how has this word originated. But, the dictionary meaning of freelance is self-employed, irregular, casual, temporary, etc.
The way I would interpret it is, first the word freelancer can be split into two free and lancer. Lance means peircing, so we get free peircing, so I would define freelancer as someone who casually roams around and does his work(peircing) in his own environment, frames his own rules, own conditions. He does work as an independent person. He does his work or peieces freely. Hope this is somehow related.
Thanks.

Hey, I like your definition. I'm not slumped over a computer, instead I'm going about, piercing things with my work. Cool!

Here is the wikipedia entry on freelancing:
http://en.wikipedia.org/wiki/Freelancing

It covers pretty much anything you wanted to know about freelancing.