GSM phones are not connected to your phone . Rather, it has a removable card, called a SIM subscriber information module and this Card has a unique serial number on it. This is what identifies you to your wirless provider

Generally cell phone service works so that the unique number in your phone its ESN is used by the cell phone service provider to identify who you are. The wireless service ‘knows’ that a particular phone’s serial number is your phone and knows to send telepohne calls to that phone whenever someone dials your cell phone.

The important difference about this is that you can put your SIM into any compatible cell phone and just asbout all gsm phones are compatible and that phone will now behave as your mobile phone, because the wireless company sees your unique number from the SIM in the phone. They dont care that you’ve converted phones, all they care about is if they can “see” your SIM card.
And now for the really energizing part of this. In theory, you can move your SIM card to any phone, the opposite is also true. Any phone transferab;e with any SIM card. So, if you’ve already purchased an expensive mobile phone that you enjoy and have discovered all the features, if you swap from one gsm service to a differnt one, you don’t have to spend a ton of money on a new cell hone. You can keep the phone you’ve grown to like, and all you need to do is switch the first carrier’s SIM with your new service provider’s SIM.

Source Article:
What is “Unlocking” my phone @ Articlebase