I know my cat who's always lived inside (15 years) would be lost outside. She was born inside a household, never lived outside at all and has always been dependent on humans for food. Freedom wouldn't mean freedom for her....it would most likely mean trauma and eventual death.
Our other cat was allowed to go outside at will in her old home (there was a cat door installed so she could come and go as she pleased, day or night) but always found her way back home at some point during the course of the day. Even when she was hunting (baby rabbits, chipmunks, squirrels) she always ate the manufactured food that was provided for her. As she got older she ranged outside much less frequently, particularly in the winter. In her new home she is an inside-only cat and seems perfectly content with it.
I don't think it's cruel at all to have an animal in your home for a pet. I think it IS important to be sure they get exercise and proper nutrition for their health.
