Why or how did the paint "free" them?

The mask gave them a different identity.

The degeneration of the boys' way of life is also very evident through the symbolic masks. When concealed by masks of clay paint, the hunters, especially Ralph, seem to have new personalities as they forget the taboos of society that once restrained them from giving in to their natural urges. For example, when Jack first paints his face to his satisfaction, he suddenly becomes a new, savage person. "He began to dance and his laughter became a bloodthirsty snarling. He capered toward Bill, and the mask was a thing of its own, behind which Jack hid, liberated from shame and self-consciousness" (p. 64). Certainly, Jack would not have acted in such a way if he had been in his home society, but behind the mask of paint, Jack feels free to act like a savage. It is also noteworthy, that the first mask that Jack creates is red, white, and black. These colors archetypically symbolize violence, terror, and evil, respectively, and in this novel, Golding uses these colors to illustrate those characteristics that are inherently present in humans.

Masks, even halloween masks, give a sense of alternate identity. People of all cultures use them for exactly that, to free themselves from their old identity.