What is (does) and unlocked iphone (do)? Phones internet usage?

I currently own a mytouch 3g phone. I want to upgrade to a better smartphone without having to pay out the A$$. My friend told me to go on ebay and get an "unlocked" iphone. What does "unlocked" mean cell phone wise? I use T-Mobile currently, could an unlocked iphone be used with T-Mobile? How i get internet currently on my mytouch is that i connect to my home Wi-Fi router. Can the iphone do this as well? Or will i have to pay extra for internet use?

Unlocked means its not locked to a particular carrier. In this instance they're locked to ATT.
So you could purchase an unlocked phone and pop in your T-Mobile sim card and use it. For data keep using your home Wi-Fi.

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