You get a voicemail or letter in the mail informing you that you've won a free gift for being part of the some well-known association like Red Cross. The gift isn't bad, either: it could be a couple free nights at a five star hotel in New York, or seats at an NBA game - something easily worth a few hundred dollars! The message tells you to call the number listed and setup a delivery time.
In reality, by calling them back, you have given them permission to send a sales team on you. Once inside, they will start showing you the real face of their business which includes a series of promotions they are trying to sell you. They tell you the gift you won is free, but the only way to use it at that location (the five star hotel, the NBA or NHL game) it is to show them the receipt of one of their promotions, which you would buy when they come to your house. Don't do it--you only stand to lose.
How to avoid: random free gifts don't usually happen. If you didn't enter a contest of some kind, be very wary of anything telling you that you've won big.