Originally Posted by Vitasoy

What is unlocking?
Unlocking is a procedure by which you can make a GSM phone accept another provider's SIM card.

Why are phones locked anyway?
GSM by it's nature is a very "portable" technology, allowing you to change handsets in a flash. Because of this I can get a handset from company A, and a SIM from company B and be able to be a cell phone user in a snap. Usually phones are subsidized, which means you get them for less than they are actually worth in the market. It's a way for the provider to make it easier for you to come onto their network and become a customer. Since phones are subsidized, the provider of the services is putting a trust in you, the consumer, to not get the cheap phone from them, and then immediatelly jump ship and go to another provider, so phones are locked to prevent fraud.