Which is better unlocked iPhone or to pay with plan?

What exactly is unlocked? Does that mean you have no plan?

Unlocked means the it currently h a s no carrier. Or unmarked. The means you can put your own SIM or carrier card in it. You don't have to use the standard carrier for the phone

Unlocked means you can use it with sim card of any operator. The phone will probably be locked if it's given to you by a specific operator, meaning you can't use it with others' sim cards. You will have a plan, which outlines your charges for calling, internet use, ect, regardless of whether your phone is locked or not, but sometimes the plan includes giving you a phone for free or for a reduced price. Even if the phone is locked, you can usually call the operator and ask them to unlock it after you've been with that company for some time, usually 6 months - 1 year, and afterwards you can use it with other provider's cards. I'd go for locked phone with a plan if they give it to you at a big discount comparing to buying an unlocked one.

Unlocked means not locked to 1 carrier, you can use any GSM carrier.