According to this website:
Wild camping, or use of camping accommodation outside the authorized
campsites is strictly forbidden, with serious penalties (By Law
2160/93, article 4 and By Law 2741/99 article 21).
But I wouldn't take it too seriously since it is a site that lists all official camping sites. So they're clearly interested that no one does wild camping.
According to another tourist information website (this time only in German), free camping is not allowed but especially on Greek islands is widely accepted. You should just not camp inside villages.
Wild-Campen ist eigentlich verboten, wird aber häufig auf kleineren
Inseln toleriert. Wenn man es auf einen Versuch ankommen lässt, hat
man außerhalb von Ortschaften meist mehr Glück.
As an additional hint, I read in my message boards that one night shouldn't be a problem, but you should not stay more than one night in the same place. And if there is an official campsite just next to your free camping place, you will probably get more problems than in more remote areas.