Questions about the iphone SIM card unlocking and jail breaking.

I have a few questions about the first generation iphone. I would like to buy a first generation iphone and be able to use a different service besides AT&T such as t-mobil, verizon or cingular. I dont plan on buying a data plan. I would just like to use it as an ipod and a phone. I was planing on buying a 4gig one from ebay for about $300. I'm confused about jailbreaking and unlocking. Whats the difference? Are both needed to be able to switch to a different carrier? Does it have to be done to use a different SIM card? Should I buy one that has already been jail broken? Is it legal? If i wanted to switch SIM cards where could i get one? I also heard it was possible to get free wifi to serf the internet. Is that true? Again, i was not planning on purchasing a data plan, but do you have to to have one to serf the internet? What is wifi? Do you have to pay for it? Any info would help. Sorry for the long question