When I first moved here, I bought a T-Mobile chip and slotted it into an ex-Vodafone (UK) contract Eriksonn (sp?) handset. The folks at the T-Mobile store were quite aggressive in wanting to know who had unlocked it for me. I explained that Vodafone and O2 contract phones weren't provider-locked in the UK, but I don't think they believed me.
The costs are staggeringly high though. At that time it was 25c per minute for incoming and outgoing calls - and the coverage areas are significantly less than for the same network on contract. The airtime is charged from when your handset starts ringing, regardless of whether you answer it or not.
I think the 'ancilliary' services are curtailed too, but I'm not sure - all I needed it for was voice and SMS. I can't remember whether I had a data option or not.
The chip cost $50 and I bought a $25 airtime card, which lasted about a week.
Edited to add: Oh, and no international 'cheap-rate' plans either. I think the cost per minute to the UK was around $1.25 - incoming and outgoing.