Verizon Wireless is shipping the iPhone 5 unlocked, the Associated Press reports. This means users can replace the SIM card (which contains such information as your phone number and mobile provider) and replace it with another, allowing you to use the phone on another network.
In other words, after you buy an iPhone 5 from Verizon, you could put in a card from another American carrier (like AT&T) and use that subscription. A more practical use for it, however, is when travelling to a country where Verizon’s CDMA network isn’t supported. Rather than pay for an expensive global networking plan from Verizon, you can buy a pay-as-y0u-go SIM card in the country you’re visiting, and pop that in the iPhone, getting much cheaper data and calls.
The iPhone 4 (Verizon’s first model) could not be unlocked because it did not use a SIM card. The iPhone 4S could be unlocked if you were a Verizon customer in good standing for several months, but you had to call in and request the feature.