This section is intended to be a very quick, very rough guide to choosing a license. Read Capítulo 9, Licenses, Copyrights, and Patents to understand the detailed legal implications of the different licenses, and how the license you choose can affect people's ability to mix your software with other free software.
There are a great many free software licenses to choose from. Most of them we needn't consider here, as they were written to satisfy the particular legal needs of some corporation or person, and wouldn't be appropriate for your project. We will restrict ourselves to just the most commonly used licenses; in most cases, you will want to choose one of them.
If you're comfortable with your project's code potentially being used in proprietary programs, then use an MIT/X-style license. It is the simplest of several minimal licenses that do little more than assert nominal copyright (without actually restricting copying) and specify that the code comes with no warranty. See “The MIT / X Window System License” for details.
If you don't want your code to be used in proprietary programs, use the GNU General Public License (http://www.gnu.org/licenses/gpl.html). The GPL is probably the most widely recognized free software license in the world today. This is in itself a big advantage, since many potential users and contributors will already be familiar with it, and therefore won't have to spend extra time to read and understand your license. See “The GNU General Public License” in Capítulo 9, Licenses, Copyrights, and Patents for details.
Once you've chosen a license, you should state it on the project's front page. You don't need to include the actual text of the license there; just give the name of the license, and make it link to the full license text on another page.
This tells the public what license you intend the software to be released under, but it's not sufficient for legal purposes. For that, the software itself must contain the license. The standard way to do this is to put the full license text in a file called COPYING (or LICENSE), and then put a short notice at the top of each source file, naming the copyright date, holder, and license, and saying where to find the full text of the license.
There are many variations on this pattern, so we'll look at just one example here. The GNU GPL says to put a notice like this at the top of each source file:
Copyright (C) <year> <name of author> This program is free software; you can redistribute it and/or modify it under the terms of the GNU General Public License as published by the Free Software Foundation; either version 2 of the License, or (at your option) any later version. This program is distributed in the hope that it will be useful, but WITHOUT ANY WARRANTY; without even the implied warranty of MERCHANTABILITY or FITNESS FOR A PARTICULAR PURPOSE. See the GNU General Public License for more details. You should have received a copy of the GNU General Public License along with this program; if not, write to the Free Software Foundation, Inc., 59 Temple Place, Suite 330, Boston, MA 02111-1307 USA
It does not say specifically that the copy of the license you received along with the program is in the file COPYING, but that's where it's usually put. (You could change the above notice to state that directly.) This template also gives a geographical address from which to request a copy of the license. Another common method is to give a link to a web page containing the license. Just use your judgement and point to wherever you feel the most permanent copy of the license is maintained, which might simply be somewhere on your project's web site. In general, the notice you put in each source file does not have to look exactly like the one above, as long as it starts with the same notice of copyright holder and date, states the name of the license, and makes it clear where to view the full license.