I thought I had answered this earlier, but searching through my archives and through google (because Tumblr’s search function is terrible) failed me, so I might as well do it now.

They are actually two distinct occupations, as explained by GRRM in one of his “So Spake Martin” Q+As:

“Sellswords are mercenaries. They may or may not be mounted, but whether ahorse or afoot they fight for wages. Most tend to be experienced professional soldiers. You don’t have a lot of green young sellswords – some, sure, but not many. It’s a profession a man tends to cho[o]se after he’s tasted a few battles and learned that he’s good at fighting….

Freeriders… well, that term is both broader and narrower. Narrower in that it excludes foot soldiers. You need a horse to be a freerider. Otherwise broader.

Freeriders are mounted fighters who are not part of a lord’s retinue or feudal levy. Some are veterans, sure, but also green and untrained recruits, farm boys on ploughhorses, men dispossessed by the fighting, a very mixed bag. They don’t as a rule collect wages. Some fight for plunder, of course. Other to perhaps to impress a lord or a knight, in hopes of being taken permanently into his service. For many it is simply a means to survive. If the war sweeps over your village, your house is burned, and your crops stolen or destroyed, you can hide in the ruins and starve, flee to the nearest city for refuge, take to the woods as an outlaw (the ones who do that are oft called “broken men”)… or you can saddle your horse, if you’re lucky enough to have one, and join one army or the other. If you do, you’re a freerider. Being part of an army at least gives you a better chance of being fed.

There are all sorts of freeriders, ranging from wandering adventurers who are virtually hedge knights (lacking only the knighthood) to the aforementioned farm boys on drays. Most are used as scouts, outriders, foragers, and light cavalry.

Obviously, there is some overlap between the two terms. A mounted man who fights for pay could be called either a freerider or a sellsword.

Both terms carry a certain stigma in Westeros. Sellswords are said to have no loyalty, and freeriders no discipline.”

So the distinction is that a mercenary is a professional soldier who fights for wages, whereas a freerider is an amateur volunteer who fights primarily for room and board with maybe a chance of plunder or getting a permanent job.

The social status of the freerider is interesting, because horses are quite expensive, and even a plowhorse is an indicator that a peasant family is doing well for itself and is probably among the upper ranks of the peasantry. Moreover, learning to ride and fight from horseback is not a simple endeavor and requires substantial training and spare time to do the training in. 

Given this, it’s kind of interesting that someone would choose the economically precarious lot of the freerider. My guess is that you get freeriders through a couple different social processes:

1. Additional recruitment beyond the feudal levy. While most medieval wars were fought by professional soldiers, with traditional feudal levies being gradually phased-out, the longer and more intense a conflict became, the more you turn to additional sources of manpower and better-off peasants who have their own horses are an easy way to find additional cavalry.
2. “War is a young man’s game.” Another part of what might be going on is the trickle-down effect of a society and culture dominated by a warrior caste who conflate the virtues of masculinity and soldiering. Thus, we see situations like that of Rolly Duckfield or Dunk, young peasant men who dream of becoming knights even if their birth should rule it out might well be swept up in the romance of war and ride off to chase their dreams in the service of their lord, who’s unlikely to turn down “free” military labor.
3. Social mobility through any means necessary. Both historically, and in Westeros, working for the nobility was a good path to social mobility. Not only was pay, benefits, and job security pretty good, but because physical proximity is the coin of medieval politics, even low-level flunkies have a chance to raise in status. They’re probably nto going to become knights or lords, but they might well become sheriffs, which in turn might allow them to become an esquire and get their family officially into the lowest ranks of the nobility. So it may well be that, despite the lack of pay and the risk of death, peasant boys might think that the chance of getting into a lord’s service is worth it.