What's difference between locked and unlocked?

Locked means the device is locked to a particular carrier, and the device will only work on their network. Unlocked, means the device is not locked to a particular carrier and can work on other networks. Unlocked devices will work on other GSM networks that support the frequencies the iPhone operates on.

http://ipod.about.com/od/ipodiphonehardwareterms/g/unlocked_def.htm