What is the correct way to free memory in C#

1.If I have something like Foo o = new Foo(); inside the method, does that mean that each time the timer ticks, I'm creating a new object and a new reference to that object?

Yes.

2.If I have string foo = null and then I just put something temporal in foo, is it the same as above?

If you are asking if the behavior is the same then yes.

3.Does the garbage collector ever delete the object and the reference or objects are continually created and stay in memory?

The memory used by those objects is most certainly collected after the references are deemed to be unused.

4.If I just declare Foo o; and not point it to any instance, isn't that disposed when the method ends?

No, since no object was created then there is no object to collect (dispose is not the right word).

5.If I want to ensure that everything is deleted, what is the best way of doing it

If the object's class implements IDisposable then you certainly want to greedily call Dispose as soon as possible. The using keyword makes this easier because it calls Dispose automatically in an exception-safe way.

Other than that there really is nothing else you need to do except to stop using the object. If the reference is a local variable then when it goes out of scope it will be eligible for collection.¹ If it is a class level variable then you may need to assign null to it to make it eligible before the containing class is eligible.

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¹This is technically incorrect (or at least a little misleading). An object can be eligible for collection long before it goes out of scope. The CLR is optimized to collect memory when it detects that a reference is no longer used. In extreme cases the CLR can collect an object even while one of its methods is still executing!

Update:

Here is an example that demonstrates that the GC will collect objects even though they may still be in-scope. You have to compile a Release build and run this outside of the debugger.

static void Main(string[] args)
{
    Console.WriteLine("Before allocation");
    var bo = new BigObject();
    Console.WriteLine("After allocation");
    bo.SomeMethod();
    Console.ReadLine();
    // The object is technically in-scope here which means it must still be rooted.
}

private class BigObject
{
    private byte[] LotsOfMemory = new byte[Int32.MaxValue / 4];

    public BigObject()
    {
        Console.WriteLine("BigObject()");
    }

    ~BigObject()
    {
        Console.WriteLine("~BigObject()");
    }

    public void SomeMethod()
    {
        Console.WriteLine("Begin SomeMethod");
        GC.Collect();
        GC.WaitForPendingFinalizers();
        Console.WriteLine("End SomeMethod");
    }
}

On my machine the finalizer is run while SomeMethod is still executing!

The .NET garbage collector takes care of all this for you.

It is able to determine when objects are no longer referenced and will (eventually) free the memory that had been allocated to them.

Objects are eligable for garbage collection once they go out of scope become unreachable (thanks ben!). The memory won't be freed unless the garbage collector believes you are running out of memory.

For managed resources, the garbage collector will know when this is, and you don't need to do anything.

For unmanaged resources (such as connections to databases or opened files) the garbage collector has no way of knowing how much memory they are consuming, and that is why you need to free them manually (using dispose, or much better still the using block)

If objects are not being freed, either you have plenty of memory left and there is no need, or you are maintaining a reference to them in your application, and therefore the garbage collector will not free them (in case you actually use this reference you maintained)