I got my iPhone 3G (16GB) at launch, on the £35p/m 18month contract.
When the iPhone 3GS came out, I bought one (32GB) as a pay-as-you-go handset and put my 3G contract SIM in it, and flogged the 3G handset.
When my 18 months were over, in December 2009, I had my contract changed to iPhone Simplicty £20 - for those that don't know it, it's a rolling 1-month contract at £20p/m for exactly the same as the iPhone £35p/m contract but with extra texts (though I can’t remember the number).
For iPhone 4 I'm not sure what to do.
My current idea is to sell my 3GS handset, buy iPhone 4 as a pay-as-you-go handset and then either have O2 transfer my Simplicity 20 contract over to a microsim (will they do this?), or to cut up my current SIM to fit (I did this with another SIM for my iPad as no microsims were available here when I got it!).
Unless they do a contract that works out better....