A second stage regulator works on differential pressure between your lungs and the ambient water surrounding you.
When it's in your mouth, the inside of the reg is at the same pressure as your lungs, and the outside of the reg at ambient. As you breath in you create a small difference in pressure between your lungs and airways and the ambient pressure and this "draws in" the soft flexible diaphram on the front of the reg (the side that is opposite the mouth piece). As that diaphram pulls inwards, it pushes down on a lever, and that starts to open a valve that lets high pressure air (at around 10 bar above ambient as controlled by the 1st stage regulator) flow into the volume formed by the reg, your airways and your lungs. When your lungs are as full as you need, you stop breathing in, the air pressure in your airway reaches just slightly above that of the ambient water pressure, and the diaphram moves forwards, letting the air demand valve close, and so stopping the flow of air.
In reality, it's not an on/off type arrangement, but a proportional one. The harder and faster you breath in, the more the diaphram moves and the more it opens the demand valve and the quicker air flows into your lungs.
In order to feel "easy to breath" the cracking pressure, the differential pressure at which the demand valve starts to open cannot be to large, or it feels like you are sucking in but not getting any air.
But in order not to freeflow, the cracking pressure shouldn't also be too low, otherwise the diaphram can move too easily and push on the demand valve, and send air into the reg when it's not wanted.
This is most often an issue when the reg is out of your mouth. Here, the roughly 1" to 1.5" of water differential pressure it takes to push the diaphram and open the demand valve really isn't very large, so it can be easy to have the regulator "free flow" when it's out of your mouth, even when it is set perfectly.
If when you are on the surface and you put the reg down from the air, and into the water front face first, ie diaphram down, mouth piece upwards, a small bubble or air can be caught under the diaphram, and as the reg is pushed more than 1.5" below the surface, that opens the Demand valve and air flows out. Because of an effect called the "venturi effect" once the air has started to flow out, it cam keep going and be a little harder to stop, so a freeflowing reg that has been submerged in this way can stay feeflowing, wasting your air and making a loud bubbling mess.
So, when you put the reg into the water, lower it in sideways, ie with the hose facing up, the diaphram and mouth piece level on each side, so that as it goes under the water, the water pressure can easily flow into the open mouth piece and fill up up the insides of the regulator at exactly the same time as it fills up the diaphram side. This means no differential pressure can happen, and the reg doesn't freeflow.
Once the reg is below the water, and the inside and diaphram side are full of water, ie no air, then there is also no differential pressure so no freeflow. However, if the purge button is pressed or knocked, that can have the effect of setting off a free flow as it pushes the water that is currently in the reg out, and once again a differential pressure occurs!
This also makes it real easy to check the cracking pressure is set to a sensible level. Simply make sure the air is on, and deliberately lower the ref carefully into the water, level as possible, diaphram side down, mouth piece straight up, and when you reach a depth of about 1 to 1.5" of water, normally just as the water gets to the mouth piece, you'll hear the reg crack and start to flow!. If it cracks before this point the cracking pressure is too low, and if you can get the whole reg submerged before it flows the cracking pressure is too high
Hope that explains things