What exactly does an unlocked phone do?

Ponders?

New member
Does it just enable you to insert any SIM card and have it work?

Say I have a Vodafone SIM card on my current phone. Could I buy an unlocked phone from the internet, insert my Vodafone SIM, and carry on normally?
At the moment I have a prepaid Vodafone SIM for a cheap Nokia phone (I don't even know the model), and I want to buy an unlocked iPhone 3/4 off eBay. I just want to know if I can use my Vodafone SIM on the iPhone.
 
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