Like God's natural knowledge--his knowledge of what is possible, necessary, and impossible--God's middle knowledge is logically prior to his decision to create (or actualize) this world. But like God's free knowledge, middle knowledge is of contingently true propositions.
Here is an example of how God knows the future on the basis of middle knowledge:
1. God knows that if Eve were placed in the garden, she would freely eat the fruit.
2. God knows that he creates a world in which Eve is placed in the garden.
3. God deduces that Eve will eat the fruit.*
Now suppose we understand free will to be incompatible with determinism and define a free action as follows:
An action A is free in circumstance C if and only if it is elicited by an agent G in C and G is not causally determined to elicit A.Then Molinism is compatible with human free actions. For God creates circumstances in which agents such as Eve elicit an action (e.g. an intention or other act of will), but God and other agents (or events) do not causally determine that the action is elicited--rather Eve exercises her will of her own accord.
But suppose we add that the future is open to Eve such that there are two possible futures open to Eve at some time T. In one possible future at T, Eve freely eats the fruit; in another possible future Eve freely refrains from eating the fruit. That is, we think that a free action is defined as follows:
An action A at time T in circumstance C is free if and only if it is elicited by an agent G, G is not causally determined to elicit A, and at T in C, G has the ability to refrain from willing A or to will some other action B.
Then Molinism is incompatible with human free will. For on the Molinist understanding God is able to know what G would freely do in C and there is only one free action G would do if C were actual. That is, there is no other possible circumstance C wherein G freely refrains from A or elicits some other action B. There are not two possible futures open to G where, in the exact same circumstances G freely wills A in C but freely refrains or wills B in C. If A were to refrain or will B in C, A would be causally determined to do so.
So is Molinism incompatible with free will? If free will requires that one have a power such that alternative possibilities are open to one in virtue of having that power then the answer is, no.
* If God is atemporal it is difficult to see how God could have foreknowledge, properly speaking, according to Molinism. God would have B-theory knowledge--for instance he would know that Rome's burning precedes Obama getting elected president in the ordered sequence of events--but God would not have knowledge at Rome's burning that Obama will be elected president.
If God is temporal then he would have genuine foreknowledge. He would have it on the basis of his middle knowledge and quasi-perceptual knowledge that such and such time is now and such and such later time is in the future with respect to the present.