[alea_iacta_est]

I can try :)

> how being put in jail for transgressions and being free are interrelated?

Jail acts both as a deterrent, through fear of being punished, and it also incapacitates the offender to commit more crime to protect society.

> Who or what determines what is a severe enough transgression to lose your freedom?

It's the people, through laws, who determines what behavior is or is not acceptable in society.