It's probably a complex set of factors including developer good will and competition in the marketplace (VSCode is obviously directly competing with Atom, for instance, which is also free).

One interest small piece of the larger puzzle is that the Monaco text editor at the heart of VSCode was originally built for Azure and Visual Studio Team Services cloud editing. It was then also subsequently embedded into IE's Dev Tools (and now Edge's Dev Tools). It's a neat example of building a tool for several existing needs embedded into existing products/projects and then finding that the same tool was also interesting as the core to its own product.