What is Free Space Loss?

"The reduction in power density (attenuation) of an electromagnetic wave as it propagates through space" In other words it means how much energy an electromagnetic wave lose when its traversing through space.

What else can cause energy reduction?

Everything.It is impotent to understand that most of the calculation will show theoretical information. It is very difficult to predict the real reduction of energy since there are many factors that can cause reduction in energy. terrain contours, environment (urban or rural, vegetation and foliage), propagation medium (dry or moist air), the distance between the transmitter and the receiver, and the height and location of antennas.

How is my wireless network have anything to do with this?

Everything. Positioning your wireless access point in a great distance from your wireless adapter will result in very poor signal. When the waves goes through walls and objects most of the power is reduced. By the time the wave is received the receiver hardware is not able to distinguish between the noise and the signal because the signal is too poor for the hardware to handle.
    Calculation
    Free space loss (dB) = 32.44 + 20 log f (MHz) + 20 log d (km)
    This is the basic theoretical formula to calculate free space loss. In reality every object on the way can cause reduction in energy. trees can cause 10dB~15dB loss while conquer walls can cause 20dB~25dB.
    Simulation
    Free Space Loss simulation tries to show how distance and frequancy effect the path loss. the forumla is updated when you drag the access points from each other or when you change the frequency . The free path tutorial doesn't consider any objects on the way.