Shares and options on shares can be granted. An example (not the only case) would be the granting of shares or share options to employees. The recipient of the grant is not required to "pay in".

Another case would be when new shares are granted in place of dividend. The famous "payment-in-kind".

An example from UK company...."Each eligible employee may be granted EMI options over up to £100,000 worth of shares (valued as at the date of grant)."

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Note added at 1 hr (2006-10-14 16:29:50 GMT)
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Employee Stock Option Plan: At the annual general meeting of our shareholders held on August 14, 2001, we introduced an additional employee stock option plan under which Equity Shares not exceeding 7.5% of the issued and paid-up equity share capital of the Company have been earmarked for grant at any given time to present and future employees and directors

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Note added at 1 hr (2006-10-14 16:51:15 GMT)
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Just a note..."freely allocated" is a term also used but I believe less frequent.