Two words that sound interchangeable describe opposite formulation decisions. One means no fragrance was added; the other frequently means fragrance was added specifically to hide a smell.
Raw ingredients smell of something
Base oils, emulsifiers, surfactants and preservatives all carry their own odours, and combined they rarely smell pleasant.
A formulator producing a product with no scent at all has to either accept that smell or neutralise it, and the second option requires adding material.
Masking fragrances exist for exactly this purpose. They are blended to cancel the base odour rather than to produce a perceptible scent of their own.
Unscented describes the outcome
Unscented is a claim about how the finished product smells to a user. It says nothing about what was added to achieve that result.
A product can contain a masking fragrance and be accurately described as unscented, because the user does not perceive a scent.
For someone avoiding fragrance because of sensitivity, this is the worst case, since the ingredient is present and the label suggests otherwise.
Fragrance-free describes the formulation
Fragrance-free indicates that no fragrance material was added for scent purposes, including masking blends.
The claim is not tightly regulated everywhere, and definitions vary between markets, so it carries different weight in different places.
Reading the ingredient list is more reliable than reading the front of the pack, since fragrance materials must generally be declared there.
It is also the only claim of the two that tells a buyer something about what went into the bottle rather than about how the finished product happens to smell.
The ingredient list has its own gaps
Fragrance compositions are often declared as a single collective term, which can cover a large number of individual materials.
Some jurisdictions require named declaration of specific fragrance allergens above a threshold, so those appear individually further down a list.
Essential oils are declared under their botanical names rather than as fragrance, which is why a product can list no fragrance and still contain scented material.
Why the distinction matters in practice
Fragrance materials are among the more common causes of contact reactions in cosmetics, which is why sensitive-skin ranges avoid them.
Someone reacting to a product cannot identify the cause from a collective fragrance declaration, which makes elimination difficult without help.
A dermatologist can test for specific fragrance allergens, and that is the route to an answer rather than working through products by trial and error.