Free dining is a promotion that is offered through Disney to encourage traveling in August and September. You pay Rack room rates and then can get the dining package for free.
Most hotels have at least a small number of rooms available for this promotion.
You can book your package in early to mid April. Though nothing has been officially announced for 2008, the assumption is that they will offer it. UK has a free dining promotion, and those who stayed during free dining in 2007 were offered "bounce back" which is the opportunity to book free dining for 2008.
The official dates that free dining will be available for the general public have not been announced yet either, and the general window is generally shorter than the UK or Bounce Back window. (They have more dates for the promotion than we do)