This quotation is taken from Narrative of the life of Frederick Douglass an American slave, written by himself.
To be a “slave in form” means to physically be a slave and to be a “slave in fact” means to mentally be a slave. So when Douglass writes that he’s no longer a slave in fact he means that his mind is set free and he’s no longer enslaved by it. Even though he’s still seen as a slave he’s now freer than he has ever been before.
Mrs. Auld learns Douglass how to read but when Mr. Auld finds out about it he tell her to stop because, as he says, “If you give a nigger an inch, he will take an ell.” By learning how to read Douglass take the first step in freeing his mind, he gets hold of a book and says that it “…gave tongue to interesting thoughts of my own soul, which had frequently flashed through my mind, and died away for want of utterance.” When he later battle Mr. Covey, even though not winning, the power of refusing and standing up for yourself is greater than the fear of punishment.
“This battle with Mr. Covey was the turning-point in my career as a slave. It rekindled the few expiring embers of freedom, and revived within me a sense of my own manhood.”
After their battle Mr. Covey never lays a hand on Douglass again because his reputation is at stake. Earlier in the narrative you can read: “It is better that a dozen slaves should suffer under the lash, than that the overseer should be convicted, in the presence of the slaves, of having been at fault.” Because Mr. Coveys reputation was at stake he chose to save it and spare Douglass. This shows how you can be a slave in fact, a slave of mind. Even if Covey is in form a free man his mind is enslaved by his view of himself and the wanting to keep his reputation.
Also Mrs. Auld gets enslaved by the power she realizes she has after a while. After her husbands lecture she start to treat Douglass as a slave and not as a man anymore. He write that: “She finally became even more violent in her opposition than her husband himself.” I think that somewhere she looses herself and becomes a slave to mind, someone who doesn’t care about the reality but only care about appearance.