unlocked phones?

Hey everyone. My question is simple but I'm feeling talkative, so I'm going to tell you my whole dilemma. Yesterday I was at the beach with my friends and I had to pee, so I went into the ocean for some public deliverance and quality time with my ecosystem. Post-urination mitigation, I let myself drift back to the shore. Then it hit me: my Sony-Ericsson T610 had been in my pocket the entire time. It was dead, so I removed the SIM card and threw it back into the sea, pitying it like a fish too small for keeps.

I have T-Mobile service, and it's great...except I don't get coverage in my house nor at my school, the two places which need it most. I like my phone, though. It's been a real trooper, surviving 10-story drops, immersion in Gatorade, toilet water, and countless kicks and stomps. The screen lost a lot of its film so there were some areas which weren't displayed, so it was promoted to Gladiator before its passing to a happier place than my pocket.

However, my dad is the typical consumer who allows himself to get roped into long-term contracts, so I'm stuck with T-Mobile for two more months, while my phone is miles away, though making unprecedented discoveries in research of continental shelf sediments. I'm proud, but alone.

So, I've spotted an unlocked Siemens S66 on eBay for $162, ending in about 2 hours. I like the style of this phone, and it seems to have a camera on it that's worth a damn (unlike the T610), upgradable memory, and it looks cool with a slight semblance to my old phone. Now, for my question. What can you do with an unlocked phone, and how? I know that an unlocked phone allows me to use ANY GSM network or provider, but I'm very unfamiliar with that type of feature. Is it legal? Will T-Mobile (and later on) Cingular give me service if they know the phone is unlocked? Is activation of service on the phone any different than a normal phone since it's unlocked? Pretend I'm 5 years old and explain it to me please.

Thanks

Oh, and does anyone recommend a phone other than the Siemens for a similar price?