BlueTooth is a short range communication standard. It basically eliminates the need for a cable between your cell phone and a hands free device, for example, or from a keyboard to an iPad.
There are no charges associated with its use.
It depends on your particular model iPhone, but yes.
This is also called "tethering".
I have to qualify my earlier answer though - there are no charges associated with Bluetooth other than what your cellular carrier already charges for your data plan. You can't avoid that.