One advantage to buying an unlocked cell phone is the ability to buy almost any GSM (Global System for Mobile Communications) phone, rather than being restricted to a limited selection offered by a specific carrier. This can include phones only distributed in certain countries, or with features that are not available on all carriers. People also don't need to wait for a contract to expire to buy a new phone; they can remove the SIM (Subscriber Identification Module) card from an existing phone and insert it into a new one when they are ready for a replacement. This allows them to keep their number while upgrading the phone, without having to go through the carrier.
Unlocked cell phones are mobile phones that can be used on any network with interchangeable SIM cards. No matter which carrier makes the card, the phone will be able to recognize it and send voice and data over the network. This contrasts with a locked phone, which is bound to a specific cell phone service provider (or carrier) network with software settings, and is typically offered with a contract when someone starts mobile service.
Ever since the Librarian of Congress that essentially makes it illegal to unlock your phone without your carrier's permission, there's been intense interest in the issue. But when it comes to unlocked cell phones, there's also been a lot of confusion.