If I update my illegally unlocked iPhone, will it still function as a phone?

My Mom sent an iPhone from the States to the Philippines and made me unlock it illegally. I heard I'm not supposed to update it or it won't work as a phone anymore

Is this true?

I think you r talking about Gevy chip unlock which is treated as illegal. Its only illegal to Apple not to outsider. If you upgrade your phone with it your phone wil be locked and you may need to buy next new chip or get factory unlock it.

I'm not sure… Of what you are referring as illegal… Anyways if the unlock is a temporary one. Then yes, you should not update it. If you do, then there are chances that you may loose the network unlock status. There are legal and permanent unlocks available like the one from http://www.simpleunlocking.com/apple-iphone/rs16wp9/ where they use the remote unlcok service. If you want aid in this type of unlock refer http://www.mobileunlockguide.com/apple-iphone