How does a Factory Unlocked iPhone 5 work?

My carrier is t-mobile and i'm looking to buy an iPhone 5 for that provider. I've been looking on craigslist and some iphones that are for say unlocked or factory unlocked. I would like to know what the difference is between the two and if I do decide to purchase a factory unlocked iphone 5 do i just pop my sim card and it will start working? Someone please explain.

Unlocked phones are not limited to a single carrier. Unlocked phones work with any carrier that has a SIM card (AT&T and T-Mobile). Unlocked phones will not work with CDMA phones (Sprint and Verizon). Also you don't have to get a contract with an unlocked phone. You can run it off prepaid.

Factory unlocked means it was unlocked from the factory where Apple has them made.
Unlocked would mean they likely used a method like ultrasn0w to do so.

Difference, ultrasn0w is not permanent. Factory unlock is.

Yes, it will work with any carrier worldwide.

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