How does mobile data usage work?

I have 500MB of high speed 4G LTE data which gets slowed down after 500MB. I have an iPhone 3G which can only handle 3G data. If I'm using 3G data does that count as part of the 500MB of 4G LTE?

Yep, And then they drop you to EDGE speed and it like the old dial up, If you are old enough to remember that era.