As far as words and imagery go, "Free Fallin'" follows a pattern in which Petty first describes his characters with a very basic adjective, and then cements them in our head with follow-up images that help paint a picture of their personalities. For instance, he first simply tells us that "she's a good girl," but then adds images of her mama, Jesus, Elvis, America, horses, and her boyfriend. Just in case you weren't quite ready to believe him about how "good" this girl is, those names and objects certainly help complete the picture in our minds.
Next is the "bad boy," a pretty vague description at first until we get the strong images in "vampires walking through the valley," "standing in the shadows," "breaking her heart," and not missing her. So, Tom Petty sets us up with two archetypes: the good girl and the bad boy who end up affecting each other's lives. The song begins as a sort of allegory in which the characters represent ideas like "good" and "bad," rather than more complex nuances. Those nuances come later. Throughout the whole song, Petty makes a sharp visual contrast between "good girls," "Jesus," "horses," and shadowy figures, vampires, freeways, and bad boys until the two characters blend into one another in the end.
Just as he uses images to create his characters, Petty references Los Angeles and, more noticeably, the San Fernando Valley, his adopted homeland. If you're from LA, you can't help but imagine yourself in every place the song mentions, and if you're not, you can still easily picture it: a long suburban street lined with trees and front yards, but that suburban ideal backs right up onto Ventura Boulevard and the adult video stores, liquor joints, and strip malls that populate it.
By the end of the song, it appears that both characters have transformed. The bad boy feels guilty, lonely, and repentant and wishes he could have his ex-girlfriend back. The girl, on the other hand, is getting over her heartbreak by leaving the Valley altogether and starting over in the city. The "falling" imagery that gets repeated over and over can mean both a fall from grace, like a fallen angel, a fall into despair, or a fall into exhilarating freedom. What do you think happens to our "bad boy" at the end of this song? How does he fall?