Carwash said:
More than that. 'Unlocked' normally just means that the phone is no longer restricted to a prescribed network. 'Jailbroken' means that you have control over the iPhone's internals - more so than Apple normally allows. So you can fiddle with it, install your own software, themes, etc etc.
Actually, Jailbroken is easier to achieve that unblocking an iPhone. Whenever Apple releases a new firmware, the Jailbrake is always available before the unblocking software.
With Jailbrake, as Carwash said, one can modify the iPhone but is not allowed to use any network, however, the iphone could work with any contract or PAYG SIM card from the network that sells the iPhone, in the UK that is O2.
Unlocked iPhones can be modified as well as work with any sim card, including from other countries.
I Jailbroke my iPhone when it was a lot harder than today. the version was 1.1.1 and I had to wait a couple of months before somebody found the way to unlock it. The iPhone as a phone is not quite there yet but as a phone + MP3 + MP4 + game station + internet station + etc, etc, etc, it is absolutely brilliant.