What is the difference between a locked iPhone 4 and an unlocked iPhone 4?

I posted last week trying to decide what kind of smart phone to buy. I have no decided after the advice of many fluther users to go with the iPhone 4. I am currently with Bell and my contract will expire soon, so I am planning to stay with them and get the iPhone 4 and a new smart phone plan.

My question is: what does it mean that bell has locked the iPhone4? What kind of functionality was removed when they did this? Will there be applications and features on the phone that I will not be able to use unless I pay? My last phone had programs installed on it that I could not use unless I paid a monthly fee – totally ridiculous. Does anyone have the iPhone 4 who can speak to its functionality?

Would it be possible to buy an unlocked iPhone 4 and then use it with a Bell service plan?