What is an unlocked phone?

I have a Iphone 3gs that has a Sim card in it and the phone was factory reseted because I am selling it. The Sim card is a pay-as-you-go Sim. I used to use it under at&t but after a while I upgraded to my Nokia Lumia. It is easy for someone else to set it up. In order to have someone have the ability to use it do they have to get an account with the carrier that the Sim card is registered to? Do they need a code from or something? I want to get as much money out of this Iphone 3gs. It comes with a charger and a case.

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