The correct option, "Free energy is converted into potential energy and stored," accurately describes the core mechanism of photosynthesis, where light energy from the sun is harnessed by chlorophyll in plant cells. This energy is used to convert carbon dioxide and water into glucose, a form of chemical potential energy, while releasing oxygen as a byproduct. This process is vital for the sustenance of life on Earth as it forms the basis of the food chain and regulates atmospheric oxygen, reflecting the intricate energy transformations that underpin both ecological and physiological processes.