Q: where on itunes does it tell me my iphone has been unlocked

There is no "unlock" code for iPhones. You should have gotten an email from o2 stating that your phone is unlocked and instructions on how to complete the process. Did you follow the instructions in the email?

The unlocking process is done with iTunes, which I believe requires restoring the iPhone with iTunes.

You should have received an email with instructions after the unlock request was received by Apple from O2 and it was ready.

What is included with the instructions - just syncing the iPhone with iTunes?

I don't believe just syncing will do it but if so, you would be provided notice with iTunes that your iPhone is now unlocked after the process was completed.

That is in effect the confirmation.

Place a non-O2 SIM card into the iPhone and connect to iTunes using a USB cable. iTunes will confirm that the iPhone has been successfully unlocked.

Have you done this and did you get this confirmation from iTunes?

This is the process for unlocking

http://support.apple.com/kb/HT5014

The process should say: "Congratulations your iPhone has been unlocked.." in the iTunes window. You need to restore as new.

Three methods to verify if an iphone is unlocked: http://www.wikihow.com/Check-if-Your-iPhone-Is-Unlocked