Hows IPFS and Filecoin different? IPFS on Ethereum is Filecoin I believe. Currently IPFS is free, will there be a situation to pay for transaction and storage fees?
Filecoin is the incentive mechanism for IPFS. Currently the IPFS team, Infura, and people who are generous are providing public gateways but they often purge their caches frequently because there's no incentive to keep files permanently. Filecoin will change this because providers will be compensated for their storage by anyone who's willing to pay for their content to be stored long term.
The IPFS is a distributed, P2P-based file storage and -distribution system. Files stored in the IPFS are automatically distributed and stored at "some" node. When you request a file, the network "finds" it for you and delivers it to your computer. Obviously, why would anyone host a file "for you"? If everyone only hosts the files he needs, there is a problem in this approach. So you create an incentive. This incentive is Filecoin, which awards users to "rent out" disk space to store these files "for you" (or more specifically "for the system"). You get some coins for storing files, and you can "pay" other users to store files that you deem to be important.