Project Gutenberg
Project Gutenberg is the premiere spot for finding free books online, and they've arranged their science fiction collection into a nicely-organized bookshelf. From the bizarro contents of 1930s Astounding Stories to every single novel HG Wells ever wrote, you'll find a wealth of classic science fiction.

Suvudu Free Library
If you're craving contemporary novels for free, Random House's Suvudu Free Library brings new fiction to you for free. So far they've posted eight books, including ones by Laurel K. Hamilton and Elizabeth Moon. They promise to add more every month, so check back for a free dose of new fiction!

Baen Free Library
If you like swashbuckling escapism, then you won't want to miss Baen's massive free backlist of novels, many from the 1980s, all available for free download.

Google Books
Google has a small collection of public domain science fiction novels and zines from before 1923.

Strange Horizons
One of the best and longest-running science fiction journals online, Strange Horizons consistently publishes incredible fiction from promising newcomers and stars alike. The site is updated weekly with fiction, art, poetry, and reviews, and you can plunder their extensive fiction archives whenever you like for that much-needed free fiction fix.

Tor.com
Tor.com is another amazing online publication, connected with the publisher Tor, which updates daily with reviews, blog posts, art, commentary, and (hooray!) tons of free fiction from authors you know and love. Cory Doctorow serialized his new novel Makers on Tor.com before it hit print, and you'll see regular stories from luminaries such as Charles Stross, Elizabeth Bear, and John Scalzi. Check out the fiction archives, or just browse the site.

Book View Cafe
Book View Cafe publishes a lot of free fiction online, especially out-of-print recent classics that deserve to remain available to hungry readers. Some books are also available for download for a small price - most are under $5. You can browse their science fiction and speculative fiction sections (they also have horror, romance, and many other genres). I was amazed to discover that they are serializing Vonda McIntyre's 80s classic Superluminal for free, and that's just one of many gems you'll discover by browsing here. (Often a book that's available as a complete download for cash is also available in serialized, chapter-by-chapter format for free - so check all your options.)

Free Speculative Fiction Online
One of my favorite resources online for finding new free fiction is called simply Free Speculative Fiction Online. Created by Richard Cissée, this pleasingly minimalist site exhaustively lists every new (free) short story, novella and novel posted online that is in the spec fic genre, broadly defined. Come here to find old favorites or strange new tales from authors you never would have encountered otherwise. It's a must-bookmark resource.

Image by Eric Doeringer, from a weird and slightly mean art project via Art in Odd Places.