HK is great, and as free as can be in terms of everyday living. You wouldn't even notice that HK is part of China because it's effect is not really visible. The only difference may be that there are more HKers willing to speak Mandarin now due to travellers from China (and yes heehee, a permit is required to visit China), but that's it. You can still go to Haagen-Daaz for a chocolate fondue and then buy $10 (US) drinks at a hip-hop party and talk to other HKers who speak English with an American accent.
Also, people in HK were a bit worried about things immediately after the hand-over, and they would say things like "I don't feel like HK is a part of China" since they never had any ties to China before the handover. After all, China was a foreign country for many years. However, this has begun to change. This was definitely true a few years ago, when HK's economy was as strong as ever (after a few bad years economically).
Politically, it's not quite as free as a country like the US, but I'd say it's close enough that most apolitical people wouldn't notice. China has appointed someone to look over HK during this time. He's not in charge, since HKers have a right to vote, but he's a kind of 'mouthpiece' for the Chinese government in China.
Anyway, it's a nice place if you love food and shopping. If you don't, there are decent beaches and places to hike if you have a car. It's kind of a boring place if you're done with shopping and eating, but then again, it's just a matter of adjusting.
