I'm getting free internet on my new laptop, is this ok?

You're connecting through a neighbour who has an unsecured wireless network. You could do them a favour and tell them. If they find out they might not be too happy, but it sounds like they're not technically aware of the issues of security and probably won't find out or notice.

As to if it's illegal, I suppose technically it's theft but it's perhaps more like trespassing on a neighbour's lawn because they've not fenced it off or put a sign saying no entry.

its not legal, but its not something you would go to jail over or even face a fine, you can always say that you though you were on your wireless network, I went for about 4 years w/o paying for the net.

i it's free it's legal