IPhone in 2 Years Contract in USA in $199?

What is the meaning of this. I'm from India and you have to pay almost $850 Dollars to purchase an iPhone. Seems like iPhone in USA is pretty cheap.
What is the meaning of contract and why they are asking for very few bucks.

Added (1). IPhone 5s in $199 with 2 years contract?

2 year contract with a United States carrier that will not work in your country. $850 is if you want to buy a 64GB model factory unlocked.

Contracts are evil.
They seduce you with a cheap down payment, then they force you to stay on their network and you have to pay their rip off cellular data prices for two years.
You're better off where you are. People here actually think an iPhone costs $200.