Linux is built around the Linux kernel originally released by Linus Torvalds in 1991. It was developed further by volunteers and started to be used with software from the GNU project, a suite of programs that form a complete operating system. Linux continues to be maintained by communities of volunteers. It is an open source project, meaning it's source code is publicly available and can be downloaded for free.
GNU/Linux software is modelled on the Unix operating system, developed in the early 1970s by Dennis Ritchie and Ken Thompson at Bell Labs.
Where is Linux used?
Linux was originally a free operating system for PCs, but it quickly became popular on web servers, and in the 1990s became one of the most popular operating systems used by web hosting companies. It is often used with the Apache web server, MySQL database software and the PHP programming language. This combination is known as a LAMP stack.
Many mainframe manufacturers have also adopted Linux as their operating system of choice.
As processing power got cheaper, the processors used in devices like set top boxes and mobile phones got more powerful. Eventually they became powerful enough to run a full featured operating system like Linux. Linux was widely adopted by many electronics manufacturers because it is free, and its source code is easily available. Linux now runs on everything from mainframes to smart watches.
There are many different versions, or distributions, of Linux. Some distributions are managed and maintained by communities of volunteers, and some distributions are maintained by commercial companies.
Linux is free, but there are still some restrictions on what can be done with it. Linux is released under the terms of the GNU General Public License (GPL), a long and complex document which essentially says you're not allowed to pass off GNU code as your own work, and if you modify GNU code, you need to publish your modifications.
Not all software that runs on Linux is free. Many companies sell commercial software that runs on Linux, and this software is usually subject to much stricter license restrictions than the GPL. This software usually cannot be copied or freely distributed. This is equally true in embedded devices where electronics manufacturers have developed proprietary software that runs on Linux.
Debian was released in 1993. It's maintained by volunteers, and has a reputation for being very stable. The Raspberry Pi Foundation use Debian as a base for their Linux distribution, Raspbian.
Raspbian is built on an ARM port of Debian and includes the LXDE desktop, along with educational tools like Scratch and IDLE. The raspi-config program was added to make it easier to manage system settings. Raspbian includes libraries for controlling the Raspberry Pi's General Purpose Input/Output pins.
You can download Raspbian here: http://www.raspberrypi.org/downloads.