Did you ever use OS 9? I'm asking because it sounds like you're likening UNIX's "Free Memory" to OS 9's "Free Memory," but the two are very, very different.
You always have swap files in UNIX, even if you've got 8 billion megs of RAM. "Free Memory" in Mac OS X/UNIX does not indicate the amount of RAM that is really free for use. "Inactive Memory" in addition to "Free Memory" is roughly the amount of RAM available for new use. Likewise, "Used Memory" does not indicate the amount of RAM currently unavailable for use, or actively being used up.
If you run "top" in the Terminal, you can add up the wired and active RAM amounts next to "PhysMem" and the "inactive" and "free" RAM amounts reported and it should roughly equal the total amount of RAM you have in your system.
If you want an indication of how much RAM you're using, you can roughly gauge this by watching the "active" and "inactive" RAM amounts in "top." "Active" combined with "wired" would be something similar to "Used Memory," and "inactive" combined with "free" would be something similar to "Free Memory."
You can also gauge memory usage by gauging your swap file usage, or "pageouts" in top as well. "Pageins" are the total number of pages read into memory, and "pageouts" are the total number of pages written to disk. If "pageouts" seems high (20,000 or more, roughly, give or take, after running 24/7 for a month), you may want to consider adding more RAM, or using less programs simultaneously.