Originally Posted by AndrewP
This Park Tool page shows the difference.
http://www.parktool.com/repair/readhowto.asp?id=48 If it has 6 cogs at the back it will be a freewheel. If there are 8 or more it will be a freehub. If there are 7 it could be either. The bearing arrangement in a freehub makes it much stronger, so is the way to go, if you weigh 235 lb like me. If you weigh 150 lb it shouldnt matter to you, but is a good reason for getting the price down.
There were lots and lots of bikes made with 7 freewheels and not just a few with 8 speed. There were even some 6 speed freehubs made, so cog count isn't a good indicator. Take a look at
Sheldon Brown's site about half way down the page. One way to tell the difference is that freehub/cassette bikes tend to have a little bump out behind the cogs on the right side of the wheel. Freewheel hubs tend to be more symmetrical. This is not always true but can usually be trusted. Look at the pictures at the bottom of the page to see what else to look for.
For an early 90's bike, I'd suspect that the bike has a freehub. $175 for a 15 year old bike is okay but, if you want to update it, you'd probably spend less on a whole new bike.