iPhone Unlocking
So many customers are asking about iPhone unlocking so here is the current status and what can be done. Firstly, iPhones can be unlocked to work on any network using one of two different methods, either an unofficial unlock or an official unlock. Don't confuse unlocking with jailbreaking which is completely seperate (although must be performed in order to unlock the phone unofficially)
Official Unlock
Provided by both O2 (link here) and Orange to any contract customer who has owned their iPhone 2G, 3G or 3GS for more than 3 months. Customers can enter in their account details and the phone's IMEI number on the official websites and the iPhone is permanently unlocked within 5 days. This is by far the best method as it is free and your phone won't lock again if updated in iTunes. The networks decided to allow this as so many people wanted to hand on their phones after upgrading etc. They still won't do the iPhone 4 at the moment
Unofficial unlock
Generally provided by an experienced team of iPhone hackers who do it for a hobby/to get back at apple. This unlock is provided months after each official iPhone update and generally requires some experience in advanced iPhone software operation in order for it to successfully work. Currently only iPhone versions 4.2.1 and below (for iPhone 3G and 3Gs only) are unlockable and the phone must be jailbroken first. This unlock method can be more unstable and if the phone is updated at all it will tend to re-lock the phone back to its original provider. Companies will also charge for the time taken to unlock your phone, generally in the region of £20.00
Jailbreaking
Again provided unofficially, this allows various 3rd party applications and tools to be used on the iPhone/iPod Touch that haven't been approved or signed by Apple. Jailbreaking alone doesn't unlock the iPhone to use with any network, it just allows the user to customise their product in more ways than Apple allow