Having an unlocked cellphone means that you can use the device with a SIM card from any mobile carrier, as long as the SIM card is activated. Cellphones purchased from international carriers usually are not locked to a specific network. In the United States, online and physical retailers sell "factory unlocked" cellphones that were unlocked immediately after being manufactured for a specific carrier.
Definition of Unlocked
"Unlocked" is a term that applies only to cellphones that utilize GSM technology – in other words, these phones use SIM cards. When a cellphone is unlocked, it becomes possible to insert a SIM card from any mobile carrier into it, and the phone then can be used for calls, text messages and Internet access, provided that the SIM card has been activated and the line of service is current.
Never Locked Phones
Some cellphones are manufactured and never locked to a carrier. Mobile phones purchased from most Asian and European carriers, for example, have never been locked and can be used with any other carrier's SIM card. Since carriers in these regions usually don't sell locked phones, the devices are manufactured without a lock and no unlocking is ever required.
Factory Unlocked Phones
Some phones are manufactured for a certain carrier and locked to that network, but then the phones are unlocked before shipping from the factory. Third-party websites and retailers sell these "factory unlocked" cellphones at a premium, both because they offer the flexibility of use with any SIM card and because they weren't hacked or otherwise manipulated in an unauthorized manner to become unlocked.
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If you want to unlock your cellphone but don't purchase it abroad and can't afford or find a factory-unlocked phone, the only recourse is to hack the phone using a process known as "jailbreaking." This procedure unlocks the cellphone for use with any carrier's SIM card. Jailbreaking is legal but will void the manufacturer's warranty on the device.