Unlocking a phone frees it from restrictions that keep the device from working on more than one carrier’s network, allowing it run on other networks that use the same wireless standard. This can be useful to international travelers who need their phones to work on different networks. Other people just like the freedom of being able to switch carriers as they please.
The new rule against unlocking cellphones won’t be a problem for everybody, though. For example, Verizon’s iPhone 5 comes out of the box already unlocked, and AT&T will unlock a phone once it is out of contract.
You can also pay full price for a phone, not the discounted price that comes with a two-year service contract, to receive the device unlocked from the get-go. Apple sells an unlocked iPhone 5 starting at $649, and Google sells its Nexus 4 unlocked for $300.