I am not sure if the game itself is now free, but it is free to play:

FAQ:
http://www.cityofheroes.com/news/news_archive/announcing_city_of_heroes_free_1.html

Free vs paid:
http://www.cityofheroes.com/news/freedom/player_choices.html

Steam doesn't seem to be showing any details about this:
http://forums.steampowered.com/forums/forumdisplay.php?f=575
I wonder if they won't be supporting the game because of Champions Online.