Jailbreaking an iPhone means getting access to the file system. As a result, this allows you to install third party apps, and also allows you to use any SIM card from the same network the phone is originally on (ie. If you buy an O2 iPhone, jailbreaking it means you can use any other O2 SIM card in it).
Unlocking an iPhone means that you can use any SIM card from any network, not just the original one. In order to unlock an iPhone you need to go through the jailbreaking process first.
Both invalidate the warranty, but a jailbroken iPhone can be returned to a factory state just by restoring the firmware from within iTunes. With an unlocked iPhone it's not quite so easy, although there are "virginizers" out there which attempt to restore them to factory settings.
Currently there is no known unlock solution for iPhones which have version 1.1.2 out of the box, however they can be jailbroken. If the iPhone comes with a version earlier than 1.1.2 when it's bought (There's none of these in the UK), then it's unlockable upto and including 1.1.2.
The TurboSIM isn't a true unlock; essentially it clones the original SIM card and transplants the details from your SIM ontop of it. It involves cutting up your original SIM card to install into the TurboSIM. Although the benefits are it'll work with every iPhone that can be broken, which includes all versions of 1.1.2.
1.1.3, due out soon, may be a different matter though.
Cheers for that, you say turbosim isn't a true unlock, yet if allows you to easily use a different sim without tampering with the software....are there any disadvantages using turbosim? It seems to be a better solution than modifying the software as all is required is jailbreaking it, which is reversible should you need to.
I have decided I will get an iphone now seeing as I'd use an o2 simplicity, so all i'd have to do is jailbreak it, but shall i get it now or wait for the new one?