When Holmes wrote this, the concept of "free speech" in the U.S. was very different from how it's thought of today. At that time, any negative or inflammatory statement or criticism of a government official was subject to legal ramifications... especially during wartime.

For better or for worse, presumptions about free speech, in a First Amendment context, have become far more expansive over the centuries. Now, it's gotten to the point where the leader of a political party and that party's nominee can tell lies that actually put human lives in jeopardy, without consequence. If that's not shouting fire in a crowded theater, I don't know what else to call it.