Hi!

Is there any good program out there that works on Windows 7 and is free?
Something that you build with loops maybe.

Audacity is probably your best best. It's free and very popular. There's lots of info and tutorials on the net. For example how to generate explosions from white noise: http://scaryreasoner.wordpress.com/2008/04/06/how-to-create-explosion-sound-effects-in-audacity/

Can I use this program to make music and soundeffects: http://www.image-line.com/documents/flstudio.html

Or do I have to pay some license or something like that?
I'm just gonna use the demo version.

If I use audacity, where do I find free to use loops?

I think FL Studio has quite a learning curve :) And it's not free ($50 to $300). If you are prepared to pay, it could be more practical to purchase tracks or sounds you need and just focus on programming.

The demo for FL Studio is free and I'm able to save files as mp3's.
But is it okay that I use it in my app and publish it to the App Store/Market? If not, where can I download free to use loops for Audacity?

oskwish, I'm pretty sure EULA for FL Studio demo states whether or not you can use it for anything except testing, check it.
As for loops, just use google. As I said, there's ton of info about this app on the net.