[...] where does the newly created money go?
This money is used by central banks to "buy" commercial banks' bonds $\iff$ commercial banks are refinancing themselves $\iff$ this money goes to commercial banks.
Does some entity get free money?
Yes, when central banks buy commercial banks' bonds for nothing, i.e. at a 0 interest rate.
Why is that allowed?
The main reason is that as counter-cyclical agents, central banks have to change reference rates, even if sometimes doing so implies to center them on 0, or even on a negative value. Note that in the case of negative interest rates, we are talking about entities that are paid to get money.