The GNU Project was launched in 1984 to develop a complete Unix-like operating system which is free software - software which respects your freedom.
"Free software" is a matter of liberty, not price. To understand the concept, you should think of "free" as in "free speech", not as in "free beer".
The name "GNU" is a recursive acronym for "GNU's Not Unix!"; it is pronounced g-noo, as one syllable with no vowel sound between the g and the n.