Put on your fancy pants, Shmoopers. You might even want suspenders for this one.
Free indirect discourse is a big clunky phrase that describes a special type of third-person narration that slips in and out of characters' consciousness. In other words, characters' thoughts, feelings, and words are filtered through the third-person narrator in free indirect discourse.
Here's an example from our analysis of James Joyce's A Portrait of the Artist as a Young Man. And yes, we're trying to make your head spin.
The muddy streets were gay. He strode homeward, conscious of an invisible grace pervading and making light his limbs. In spite of all he had done it. He had confessed and God had pardoned him. His soul was made fair and holy once more, holy and happy. It would be beautiful to die if God so willed. It was beautiful to live in grace a life of peace and virtue and forbearance with others. (3.2.108)
See what he did there? The narrator is reporting to us the thoughts and dialogue of the character. It's almost as if he is the character, except he's still that third person. He just has a backstage pass to the character's soul. Bonus!