How do unlocked cell phone work?

I need a new cell phone because by accident I spill water on it, and I search for a new one on ebay because is too expensive to buy one without a 2year contract. Has anybody here bought one of those cell phones on ebay? an unlocked phone? I need some feedback and help. thank you all

Note : Unlocked phones are very expensive to buy . Better, you can buy a carrier locked phone and unlock it by using unlock code . To unlock it, use unlock code .You can get it from any of the online vendors like UnBBLock.com to unlock it .