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Please explain what an unlocked phone is

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I have an old GSM phone that I no longer use. I was planning on donating it to charity but then I wondered if I could use it for making cheap calls in Europe, buying a new SIM card when I get there. Is this possible?

I'm technically illiterate and I don't understand all the postings about unlocked phones (and the need to buy one from ebay) in order to buy pay-as-you-go SIM cards in Europe.

Thanks to anyone who can explain this to me!

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