In more ways than you can count on fingers & toes.
content flexibility -- more web pages, more space, means more diversity to page topic thus more chances to get top ranking.
long pages -- free host sites tend to be long, longer, longest as time goes on. More content per page larger file size per page dragging the rank potential down.
linking -- others will more likely link exchange to a site that invests rather than one that does not. Links are everything in ranking.
more credibilty -- if you offer just info no big deal. If a product or service is offered - a free hosting site is less credible, perceived as "not a real business".
no brand potential what-so-ever.
difficult for business cards and other print material: e.g. [geocities.com...] looks like the business is Geocities and not Roberts Ducks.
If you somehow start getting visitation in any quantity, bandwidth restrictions -- site possibly up for two weeks then off-line until next month.
On the other side - I know of one guy who makes 5K a month using freenet. Very niche market, fairly high price product and generally has beaten the odds.
However, if he put 5% of that monthly revenue into developing a real site -- that could be 100K per month... but he is happy with 5K and not interested.