The easier way to look at it is what is a locked phone. If you sign up for a 2 or 3 year plan where the phone is included or at a very cheap rate (say 100 bucks instead of 600), then the carrier will put a lock on it so you can't use that phone with another carrier. Once the plan is completed, then you may be able to pay a small unlock fee which opens the phone to be able to subscribe to another carrier.

This works for many people, but I prefer to own my phones, and not be locked into a contract.