Amazon allows free inbound data transfer, but charges for outbound data transfer. I don't understand what that exactly means. Does this means that data you upload to amazon is free, but data you download is not? This question may be silly but I want to know what you guys think about this.
You have it correct. Data "inbound" to Amazon (that is, packet data that is destined for the Amazon cloud servers; for example, uploads and client requests) are free. Data "outbound" from Amazon is billed (that is, downloads from the cloud and responses to client requests).
Anyway, here is a picture that may help you visualize this