A group of developers in the late 90s, inspired by the releasing of the Netscape browser’s source code, came together and put down the foundation of what became the Open Source Initiative (OSI). The goals of the OSI are very similar to that of the FSF but differ in their approach. Wikipedia cites founding member Michael Tiemann‘s words for choosing the term “open source” to
dump the moralizing and confrontational attitude that had been associated with ‘free software’ and instead promote open source ideas on ‘pragmatic, business-case grounds’.
There has been considerable friction between proponents of Free Software and those of Open Source, since the inception of the latter. Interestingly co-founder Bruce Perens has objected to this as early as 1999, hoping the OSI would become something like free software for “non-hackers”. Stallman, however, kept the gap open from his side, stating that Open Source is “not the enemy”, and that they agree on the basic pragmatic principles, but that’s about it
We are not against the Open Source movement, but we don’t want to be lumped in with them. (R.M.S)
Since that, he has taken a milder approach and explains he differenced between the FSF and the OSI in a much more objective way. All we can say is well done, (and that it proves the worth of the FSF, and certainly that there is a lot of thought behind it).
The OSI defines “open source software” like this:
Generally, Open Source software is software that can be freely accessed, used, changed, and shared (in modified or unmodified form) by anyone. Open source software is made by many people, and distributed under licenses that comply with the Open Source Definition.
The internationally recognized Open Source Definition provides ten criteria that must be met for any software license, and thus the software distributed under that license, to be labeled “Open Source software.” Only software carrying an OSI Approved Open Source License, which meets the standards of the OSD should be labeled “Open Source” software.
Just like freedom, openness can be (and is) applied to many things beyond software, like e.g. hardware and other technologies.
This has been mentioned already, but the best resource to understand the differences from the FSF’s point of view is this article.