It's important to understand that only some kinds of phones can be unlocked, namely phones that are compatible with the GSM (Global System for Mobile Communications) network. GSM phones contain a small, removable card, known as a SIM (Subscriber Identity Module), that is programmed with your subscription information and phonebook. A SIM card can be removed and placed in other GSM phones, allowing you to quickly and easily change handsets while retaining your contacts and carrier service. Today, T-Mobile and Cingular are the only two GSM-based carriers in the U.S., while Verizon, Sprint, and Nextel operate on the CDMA and iDEN networks. CDMA- and iDEN-based phones do not use SIM cards, and phones for these networks are only available from the carriers.

At its core, an unlocked GSM phone is simply that: a phone not “locked” into a single carrier’s network. Since an unlocked GSM phone is not tied to any carrier, you are free to insert your active GSM SIM card into any unlocked phone and start making calls.

Say your Aunt Martha gives you a GSM phone from Cingular that she found in a drawer. If you're a T-Mobile subscriber and you'd like to use Aunt Martha's gift with your SIM card, you'll need to unlock it. Likewise, if you have your eye on a cool phone that no carrier offers, like the powerful palmOne Treo 650 or the Motorola special-edition RAZR V3, an unlocked phone purchase is in your future. Or perhaps you're planning on traveling abroad and need to use a pay-as-you-go SIM from a foreign carrier. Simply put, an unlocked phone offers you the flexibility to choose any GSM phone before you have to choose a carrier.

Before you choose a phone, it's important to understand which frequencies--or bands--the phone supports. GSM carriers in the United States, Canada, and many parts of Latin America rely on the 1900 and 850 bands for transmitting cellular phone calls and data. In the U.S., the 1900 band is used extensively in urban and developed areas, while 850 has largely been used to boost signal strength in outlying areas. At minimum, a phone that supports the 1900 band is a must in North America.

Two other frequency bands, 900 and 1800, are used throughout Europe and in many other parts of the world. If you plan on traveling a lot internationally and you want to own just one phone, consider purchasing a quad-band phone, which will give you coverage all over the world. If you aren't a frequent international traveler, a less expensive tri-band phone will probably suffice for those times when you do travel abroad. In this case, a phone that supports the 1900, 850, and 1800 bands will give you great service in the U.S. and passable service in Europe.

Once you have an unlocked phone in your hands, using it is easy. If you already have an active SIM card from a previous or existing handset, slap it in your new phone's SIM card slot and get talking!

Phones purchased from carriers come pre-configured for total integration with a carrier's wireless services. For instance, every phone you purchase from T-Mobile will offer one-button access to "t-zones" services such as e-mail, movie listings, news, and more. The bad news is that an unlocked phone that has not been set up by your carrier will not come pre-configured. The good news is that this problem can be solved if you don't mind tinkering with your phone's settings. You'll have to manually enter your e-mail and wireless Web settings to make them work with the carrier's offerings.

Another very important thing to keep in mind is that carriers may install software on their handsets that enables specific features not available on unbranded, unlocked phones. For example, T-Mobile's myFaves program, which allows you to call up to five contacts with no limitation on free minutes, requires the use of a T-Mobile handset that supports the service. Meanwhile, Cingular's latest mobile broadband solutions require a compatible Cingular handset.

And now for the biggest drawback. As mentioned, carriers deeply discount the real cost of handsets you buy from them. If getting a free or near-free phone is more important to you than the flexibility an unlocked phone offers, then stick with the carrier's offerings. High-end, unlocked phones will take a big bite out of your wallet, and even the most basic phones are more expensive than you might expect when you aren't getting those carrier-subsidized deals.

--Joshua Gunn