Does iPhone work in Europe?

Only if you can drink the tap water

Currently, Apple has no agreements with any carriers in Spain, so legally, it will not work there.

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If it was purchased in Germany, the UK, France or the US and activated with the partner carrier in those countries (t-mobile, O2, orange, and AT&T respectively) it will work in Spain as an International roamer. You will pay roaming rates; check with your carrier to see what it will cost. And be sitting down when you ask.

Never been to Spain but just came back from Israel. I was pleased to discover that my phone worked just fine when I get a wrong number from the US! Using the Orange network, I was charged $2.49/minute.

I have just returned fron the Netherlands where my UK iPhone worked perfectly albeit roaming on a local Dutch network. Obviously the call charges are high and I had turned off data roaming, but the signal strength and ability to make and receive calls was flawless.

I have a U.S. iPhone that I used while in Spain over New Year's. It worked perfectly. You have to ask AT&T to activate it for international use, then be very careful to keep data roaming off while you're there and use wi-fi whenever possible for everything except phone calls (which will be very pricey). You can get an international roaming plan which will cover a small amount of data transfer, but you still have to be careful.

Paying attention to all this, I was able to keep the charges down: My use of the iPhone in Spain only added about $100 to my bill for that month, and it really came in handy a few times.