When CTAN was founded, in the 1990s, it was unusual to publish the terms under which a TeX-related package was distributed (or, at any rate, to publish those terms formally).
With the advent of the TeX distributions, however, people started to realise the need for such information, to protect those who create, distribute or sell the discs that hold the packages, etc. With the licence information available, the distributors can decide which packages may be distributed.
The CTAN team decided that it would be useful for users (and distributors, not to say package authors) to separate packages that were candidates for distribution, and those that were in some sense “not free”. Thus was the nonfree tree born.
From the start, the nonfree tree was controversial: the terms under which a package would be placed on the tree were hotly contested, and the CTAN team were only able slowly to populate the tree. It became obvious to the team that the project would never have been completed.
The CTAN catalogue now records the nature of the licences of a good proportion of the packages it describes (though there remain several for which the licence is unknown, which is as good, for the distributors, as a licence forbidding distribution). Since the catalogue’s coverage of CTAN is good (and slowly improving), the general rule for distributors has become
“if the package is listed in the catalogue, check there to see whether you should distribute; if the package is not listed in the catalogue, don’t think of distributing it”.(The catalogue only has a modest list of licences, but it covers the set used by packages on CTAN, with a wild-card “other-free” which covers packages that the CTAN administrators believe to be free even though the authors haven’t used a standard licence.)
There is a corollary to the ‘general rule’: if you notice something that ought to be in the distributions, for which there is no catalogue entry, please let the CTAN team (email@example.com) know. It may well be that the package has simply been missed, but some aren’t catalogued because there’s no documentation and the team just doesn’t understand the package.
In the light of the above, the nonfree tree is being dismantled, and its contents moved (or moved back) to the main CTAN tree. So the answer to the question is, now, “the nonfree tree was a part of CTAN, whose contents are now in the main tree”.