As phrased in the question, I'm looking for a free and/or open-source text-segmentation algorithm for Chinese, I do understand it is a very difficult task to solve, as there are many ambiguities involed. I know there's google's API, but well it is rather a black-box, i.e. not many information of what it is doing are passing through.
The keyword text-segmentation for Chinese should be 中文分词 in Chinese.  
Good and active open-source text-segmentation algorithm :
C#, Snapshot
Java
C/C++, Java, C#, Demo
C, PHP, PostgreSQL ICTCLAS, Demo
Java
Java, Demo
Python, Java, Demo
python Other
Sample
Google Chrome (Chromium) : src, cc_cedict.txt (73,145 Chinese words/pharases)  
In text field or textarea of Google Chrome with Chinese sentences, press
Ctrl+← or Ctrl+→
Double click on 中文分词指的是将一个汉字序列切分成一个一个单独的词
Stanford segment using CRF algorithmn.
It's under GPL
link page is : http://nlp.stanford.edu/software/segmenter.shtml
ICU has details on universal text segmentation - http://userguide.icu-project.org/boundaryanalysis
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