PlayStation Home was a social games network where PSN users could play games and socialize. Home saw a refocus in Fall 2011 in North America and Europe that put more emphasis on games than social spaces.
Home is free to use / play as far as I am aware. I'm not sure do you need to pay for certain clothes or appearance based content. But it would be no different to what Microsoft has done with their avatars and charged people for clothing for them.
It's free to but I've never used it before as I never had an incentive to do so. Also, a lot of people seem to hate it for some reason. Why I don't know.
GIant Bomb has an extensive, growing Wiki database. If you ever have an interest in anything video game related (or off topic) just type in your search on the search bar on the upper right corner of your screen. Heres the page for PlayStation Home that should answer all your question.
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