Let me see if I can remember: Free market - no barriers to entry or exit (people are free to participate without having to fulfill a bunch of check-boxes (e.g. licensing, large capital outlays for equipment, etc). Also, the consumer has perfect information, meaning that they understand what the value of a product is when compared to every other similar good. There was something else, too, but I can't remember it. You can see why it's theoretical.
Anyhow, "unregulated" means that there are no rules. Think about a situation where MS could force the industry in whatever direction they wanted - not too hard to imagine, actually. It could be argued that the defense companies have already bought half of our political system and the insurance industry has bought the other half. (We're nearly there!) These industries, controlled by an interlocking directorate, would control the country. It's easy to see why that's fascism.
This, I think, is where you got lost: Corporations don't want an absence of regulation either, as they like the rules that they create. Every company/producer will ALWAYS try to create barriers in the market so that the fundamental rule doesn't apply: "There are no long-term profits in a free market." We see profit degradation most in businesses more closely affected by the Internet for these reasons. The Internet provides much closer to 'perfect information' to the consumer. The rules that "free market capitalists" abhor are those that seek to create (closer to) perfect markets, limit the "capitalist's" influence, or keep them from limitless profit.
As an aside, the record industry has been 'hammered' by the fundamental rule - and I like it. They tried to stop it (DMCA) with their rules, but didn't succeed because the draw was too strong to the free market. Incidentally, they're busy PRing themselves back to profitability ("but, we DESERVE profits..."), which proves that greed is a much larger part of human nature than Adam Smith thought.
As far as I understand it, a long-term, perfect, free market is very close to socialism. There are no profits, just people making a living and paying what an item costs to produce. The difference from communism is that the people, not the gov't, run the companies.
The obvious question in your mind is probably about incentives to participate. The incentive (if it's profit that is the incentive) is in the short-term in new industries. There, the profits could be high for a long time. In the US, profits are a right, though. No one thinks anyone will work unless there's something in it for them. I, personally, think that's BS.
Greed is the real enemy of the free market; greed causes class stratification, strife, and (eventually) revolution.