An unlocked phone means the phone is not “locked” to one carrier.
It’s how the cell phone communicates with your SIM card, or Mobile Executable files that tell it what networks it should use. For example, if you had a Sprint locked CDMA device and you inserted a Verizon SIM card in it then the software on it would intercept the signal from your new friendly Verizon service provider and block out any mention of its own dear Sprint network resources. Now this may sound bad but actually its designed to ensure that you’re getting all of your monthly minutes off this glorious, sprinting data line right here! In other words an unlocked phone allows you to easily pop in another carriers SIM card without having to worry about whether or not it will work.
