The distortion tool allows you to distort (surprise) any active selection by grabbing one of the four corner handles. You can twist, distort, stretch and warp selections with it in 3D space.
A great example of ways distortion could be used: To make a person look heavier. This example of Britney Spears used distortion to enlarge her legs.
The Free Transformation tool allows you to rotate, mirror, move, scale, and skew any selection. You can also keep things in the current ratio by holding down the shift key as you use it. This is really useful for placing any objects in your scene exactly as you want them.]]