Hi kunno. Many free hosting providers rely on their customers eventually upgrading to paid plans to obtain more features. Some may also rely on ads. As to whether they host free and paid customers on the same server, that really depends on the provider. I would suggest asking them directly.
Yes, upgrades are a way of earning for free hosts. In other cases, forced ads are put by your free web hosting providers and the advertisements revenue will go to your free web hosting service providers to cover your web hosting costs
Free hosting has less features and mostly comes with limitations such as small disk space. Most people who are happy with the free hosting service are likely to upgrade their hosting plans to paid ones.
Free hosting has limited features as compared to paid hosting, In paid hosting you will lots features like - Bandwidth, 99.99% Uptime SLA Backups and 24/7 customer support. I will recommend to you use the paid hosting for your secure business.