What does the free version limitation of "1 payment" mean?

What does the free version limitation of "1 payment" mean? Does that mean that only one form can accept payments or does it literally mean that we can only accept payment from 1 person?

The payment submission limits refer to the number of payment submissions that can be received in a calendar month.  The limit for Free account is 1 payment submission per month.

That is still vague. Are you saying, for example, that if I am registering kids for camp, I could only collect payment from one registrant per month with the free version? That seems very odd.

You are correct.  With a Free account, you would only be able to collect 1 payment from 1 registrant per month.  This is essentially just to allow for confirmation that payments are functional.  Any test payments made when the payment field is set to test or sandbox mode will not count towards the total.