There are any number of ways to do it:
1. Set up your own server at home, you probably have a dynamic IP address so you'll need to use a service like dyndns.org.
2. Get a reseller hosting account with another web host.
3. Get a virtual private server and configure it
4. Some hosting plans will let you host multiple domains, if you really just want t host for a few friends sign up for a web hosting service that allows you several domains and set them up for the different websites.

Hostgator is not a free web host , no free web host will allow you to setup web hosting service.

I think, and could be wrong, that what he had in mind was a free or nearly free hosting service for his friends with minimal expense to him. I do something very similar to this, I host several free websites for my friends on my hosting service, the only cost to me is the extra $2/month I pay for their Domain and domain hosting (and most of them chip in a few bucks for their own domain). Right now I have less than 10 of these sites and consider that to be a perfectly acceptable gift.

If you set up a $10-15/month hosting plan with a few spare domains and let a friends use them it will work fine.

Now if he's looking to set up a paid-service for people he knows that's a different story, but he hasn't gotten back after I asked