The Ubuntu wiki describes the "sections" of the official Ubuntu repositories as follows:
Main - Officially supported software.
Restricted - Supported software that is not available under a completely free license.
Universe - Community maintained software, i.e. not officially supported software.
Multiverse - Software that is not free.
I thought that software in the Ubuntu repositories had to be open source, however doesn't the description of the Multiverse directly contradicts this?
The software in Multiverse is "gratis", but not free. These are some examples of cases in which software would be appropriate in Multiverse:
The Software is not legal in every jurisdiction (DVD Decryption, ...)
It's software-patent encumbered (MP3 Codecs, ...)
It doesn't provide the user with all of the four essential Freedoms:
Note that those do not include a requirement that modified version be released with a license that grants the same freedom. This is called copyleft, and it's seperate from pure free software.
There are issues with the licensing (like missing, unclear or invalid copyright notices)
Any of the above is disputed or unclear
As htorque quotes, "The onus is on you to verify your rights to use this software ".
Note also: much of the software in Ubuntu enters the repositories through being in Debian first, so the Debian Social Contract & The Debian Free Software Guidelines are of some relevance.
I'm not Shuttleworth, but the Ubuntu objective is not to ship a Pure Free Distro, but to solve Bug number 1. In order to be able to solve it, it needs to supply non-free software that users demands. Specially closed software firmware that is needed by lots of drivers to work.
If you are interested in a totally free system you can select "Only install free software" while installing Ubuntu.
Summarizing the answer in just one word: Pragmatism.
My answer is no
Now we should make it clear first as to what "free" means here. Are you talking about free of charge or free of use?
I believe open source concept is free of use, but it doesn't necessarily have to be free of charge as well.