Can iphone be used as an ipod touch without a contract?

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I need to buy an iphone or ipod touch. I have seen iphones for around the same price as the ipod touch on ebay. I would rather have the iphone because of the camera but I don't want to buy one if I can't use the it without a contract solely as an ipod and camera. Do I have to have a "jailbroken" iphone to do this, or will it work automatically, or not at all? Thanks