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So I just got the free key for Witcher 2 (still downloading, it's massive!)

Do I have to play Witcher 1 first to understand what's going on, are there a lot of references, inside jokes etc in the game? Or can I start with W2 right away without missing out?
You can start right away, but it's better to have played the first game. But the two games actually play very differently so not all players like both (plenty do, though, like me). The first game is also longer so if you're just playing it because you want to get to the second game you might get impatient.

My personal recommendation is to play them in order, as I think the first game is really interesting too, but I always tend to play things in order because I'm picky. Others I'm sure would have no problem jumping right into the second game.

The Witcher 2 has some references to the first game, but mostly it's just that you'll know many of the characters already. They're introduced again, of course, but it's better when Geralt meets his old friends and they're your old friends too since you met them in the first game. Also the situation Geralt finds himself in at the beginning of the second game makes more sense if you've finished the first game (but it is, of course, recapped quickly in the second game too).

Ultimately it's up to you though... if you think the first game looks interesting, definitely go for it. I think it's great, despite some shortcomings and roughness. If you're not as interested in it, then go ahead and jump right into The Witcher 2.
You could, but unless you are familiar with the story of the Witcher saga or very familiar with the plot of the first game I wouldn't recommend it. Not to mention, play your cards right, and you get weapons and armour that work well for the second game and some of the default story options in the second one are really lame (though not all are fixed by playing the first one) but it is beneficial to play the first game first. Not required, so if the first one grates on you you could just skip it, but it's a really good game.
So the giveaway was just a ploy by GOG to get us to buy TW1 and preorder TW3? I guess that worked on me then, oh well... Off to buy the first game while the sale lasts!